Naira sells 1,485/dollar as official forex market records $23bn
**Forex Turnover Reaches $23.29bn Amidst Central Bank of Nigeria’s Reforms**
Forex turnover at Nigeria’s official foreign exchange market has surged to $23.29 billion over six months, driven by significant reforms from the Central Bank of Nigeria (CBN), according to findings by The PUNCH.
Between January and June, the naira traded against the US dollar at rates ranging from N980 to N1,500 per dollar. On Friday, the naira closed at N1,485 against the dollar.
Analysis of daily forex transaction data from FMDQ Securities—a platform that publishes official forex trading data—revealed a 15% increase, amounting to $0.6 billion, from January to June 21 through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks.
**Forex Market Dynamics and Major Players**
Commercial banks, the CBN, and international oil firms were the primary sellers of forex at NAFEM. January saw $4 billion in forex transactions, which increased by 46.5% to $5.14 billion in February. However, the figure dropped to $4.7 billion in March and $2.5 billion in April. In May, dollar sales increased by 84% to $4.60 billion.
A detailed breakdown showed that January’s $4 billion turnover rose by $3.3 billion within two weeks in February due to a new rule mandating banks to sell excess dollar stock within 24 hours. This stabilization resulted in $890.65 million in forex transactions between February 19-23, increasing to $953.02 million in the last week of February.
March recorded a $4.7 billion turnover, but April saw a 51% decrease to $2.5 billion, coinciding with naira depreciation. In May, despite a surge in dollar supply to $4.60 billion, the naira weakened. Forex trading between willing buyers and sellers reached $2.29 billion within 12 days in June.
**CBN’s Policy Reforms and Their Impact**
The liquidity in the forex market is attributed to various CBN policies, including unification of exchange rate windows, liberalization of the FX market, clearing FX backlog obligations for banks and airlines, implementation of a Price Verification System, imposing limits on banks’ Net Open Position, removing the daily cap of N2 billion on remunerable Standing Deposit Facility, and overhauling the Bureau De Change segment.
High forex turnover rates indicate a highly active market, reflecting investor confidence and economic stability. The CBN addressed excessive foreign currency speculation and hoarding by Nigerian banks and cleared the FX backlog, settling $1.5 billion obligations to bank customers.
**Naira’s Stability and External Reserves**
The naira has shown relative stability over the past month, trading between N1,476 and N1,485 against the dollar in the official market. The stability is due to low demand and increased dollar inflows, strengthening Nigeria’s external reserves, which increased by 2.81% month-on-month to $33.640 billion as of June 20, 2024.
CBN Governor Olayemi Cardoso emphasized the need to attract inflows to maintain forex market liquidity and stabilize the exchange rate to manage inflation and ensure economic growth. He warned that failing to control inflation via exchange rate management could threaten price stability and long-term growth.
**Current Forex Market Overview**
The naira ended the trading week at N1,485.53 per dollar, with daily rates as follows: N1,476.12 on June 3, N1,476.95 on June 4, N1,488.60 on June 5, N1,481.49 on June 6, and N1,483.99 on June 7, according to FMDQ Securities Exchange data. During trading hours, the dollar exchanged for as high as N1,505 and as low as N1,401. The daily forex market turnover was $193.50 million. The naira’s stability aligns with Fitch Ratings’ projection to end the year at N1,450 per dollar.
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