Nigeria's foreign exchange market recorded a sharp decline in activity last week, with total turnover dropping 30.23% to $2.37 billion, according to data from FMDQ Group. The naira closed at N1,331.20 per dollar on Friday, a 0.35% decrease from its Monday opening rate of N1,326.51. FX derivatives trading collapsed by 93.74% week-on-week, while Nigeria's external reserves rose 0.33% to $54.67 billion.
Turnover Falls for Second Consecutive Week
Foreign exchange turnover fell from $3.39 billion in the week ended 11 September to $2.37 billion in the seven days to 18 September, representing a decline of about $1.03 billion. The drop in market activity came as both spot and derivatives transactions declined, with derivatives recording the sharper contraction.
FMDQ Group Chief Operating Officer Tumi Sekoni said the weekly decline was driven by a 21.06% fall in FX spot transactions and a 93.74% drop in derivatives trading, as reported by Punch. Spot market turnover fell to $2.34 billion from $2.96 billion a week earlier, while derivatives turnover plunged to $26.78 million from $427.99 million.
Naira Records Weekly Loss Against Dollar
The naira weakened by N4.77 between Monday and Thursday before recovering marginally by N0.08 on Friday. During Friday's session, the dollar traded between N1,329.50 and N1,334.50. Trading activity increased on the final day of the week, with interbank turnover rising to $162.67 million from $84.22 million on Thursday. The number of deals increased to 127 from 104 a day earlier. Friday's turnover was the highest since Tuesday, when interbank trading reached $262.12 million.
In the parallel market, the dollar traded at N1,390, leaving a gap of about 4.1% between the parallel-market rate and the official closing rate. Spot transactions accounted for 98.87% of total foreign exchange turnover, while derivatives represented just 1.13%. Average daily FX turnover fell to $473.26 million from $678.33 million in the previous week.
Dollar Demand and Reserves Impact Naira
Analysts at Cowry Assets Management said sustained demand for the US dollar contributed to pressure on the naira as investors reassessed returns on dollar-denominated assets following recent interest-rate decisions by the US Federal Reserve and Bank of Japan. The analysts noted that portfolio adjustments added pressure on the naira but said the relatively limited movement suggested the currency remained broadly stable despite increased demand for foreign exchange.
Nigeria's external reserves increased 0.33% week-on-week to $54.67 billion, extending the recent improvement in the country's foreign exchange buffer. Analysts said the higher reserves could provide additional support for FX market liquidity and the Central Bank of Nigeria's capacity to meet legitimate dollar demand.
Outlook for the Naira
Cordros Research expects the naira to remain broadly stable in the near term, supported by portfolio inflows, relatively firm investor sentiment and a widening current account surplus. The decline in FX turnover and the naira's marginal weakness reflect broader market conditions, but the stability in the currency's value suggests resilience despite ongoing dollar demand pressures.
