The turnover in the official foreign exchange market has surged to $11.43 billion over a span of more than two months, propelled by recent reforms initiated by the Central Bank of Nigeria.
An examination of reports and data on daily forex transactions, accessible on the FMDQ Securities website, a platform that publishes official foreign exchange trading activities in the nation, indicates a significant increase of 185.75 percent, equivalent to $7.43 billion, between January and March 15th, facilitated through the Nigerian Autonomous Foreign Exchange Market (NAFEM) operated by Deposit Money Banks.
Key players in the sale of forex at NAFEM include commercial banks, the Central Bank of Nigeria (CBN), and international oil firms. The enhanced liquidity at NAFEM follows a directive issued by the CBN on February 1, 2024, mandating banks to offload their surplus dollar reserves within 24 hours to bolster liquidity in the FX market.
According to officials, the central bank is of the belief that certain commercial banks hold extended foreign exchange positions, aiming to profit from the unpredictable fluctuations in exchange rates. Although the naira experienced a historic low of N1,850/$ at the parallel market, the move to unify the official and parallel market exchange rates garnered approval from economists and stakeholders.
Nonetheless, there are calls for the CBN to address forex backlogs estimated at over $5 billion and meet FX demands in the official market to prevent a potential deviation of the parallel market rate from the official rate in the future.
Further analysis of the dollar supply reveals a $4 billion turnover in January, with an additional $3.3 billion increase within two weeks (February 2 to 16) after the implementation of the new regulations. Subsequent weeks witnessed a stabilization in supply, recording $890.65 million between February 19 and 23, escalating to $953.02 million in the week ending February 26 to March 1.
From March 4 to 8, the market experienced a gain of $1.07 billion in forex turnover, which decreased to $848.14 million in the last week (March 11 to 15).
Moreover, the naira is anticipated to achieve further stability this week, driven by a reduction in demand pressure amid a decline in dollar supply. On Monday, the naira slightly appreciated against the United States dollar to N1,572.86 at the official market compared to N1,602.43 recorded the previous Friday.
At the parallel market, the local currency traded between N1,600 and N1,610, following a 0.95 percent gain last week, with the dollar quoted at N1,602.75 on Friday, stronger than the N1,617.96 quoted at the start of the trading week.
In summary, the foreign exchange market concluded last week on a positive note, with the naira exhibiting resilience against the dollar across both official and parallel markets.
