The forex turnover on the FMDQ, where the exchange rate trades officially, closed at a turnover of just $61.9 million, the lowest since January 2024.
This is also the second-lowest daily average turnover this year, second only to the $59.6 million recorded on January 8, 2024, which is the lowest this year.
The month of January saw a remarkably low forex turnover as the central bank struggled to find a strategy to restore confidence in the country’s forex policy.
However, since then, the forex market has been stable despite more than 40% depreciation so far this year.
What the data is saying
According to data from the FMDQ, the exchange rate closed trading on Tuesday at N1,601/$1, a slight appreciation of 0.38% from the N1,607.15/$1 reported on Monday.
- The intra-day highs and lows for the week also recorded N1,623 and N1,560, respectively, suggesting further weakening on the high end of trades.
- However, the market turnover of just $61.9 million, falling by 19.7% from the $77 million reported a day earlier.
- Incidentally, the $77 million reported on Monday was also the lowest since January, suggesting that the forex market might be experiencing a squeeze.
- One trader informed Nairametrics that this could be a result of the “end hunger” protest that has engulfed most parts of the country, affecting businesses.
- Another source suggests this could also be due to the massive stock market sell-offs reported on Monday.
Meanwhile, on the parallel market where the exchange rate is sold unofficially, trades were quoting around N1605/$1, in line with the official rates.
Nigeria’s external reserves were at $36.8 billion as of August 5, 2024.
What you should know
It appears that the Central Bank of Nigeria (CBN) is yet to sell any foreign exchange (FX) on the official market this week.
Also, the ongoing 10-day hunger protest may have led to slow business and trading activities, which resulted in lower FX turnover.
Two weeks ago, the CBN sold a cumulative amount of $148 million to authorized dealers. The foreign exchange was sold to 29 Authorized Dealer banks at exchange rates ranging between N1,470.00$1 and N1,510.00/$1. It was the third to authorise FX dealers in July as the CBN tried to boost liquidity in the FX market.
The apex bank earlier announced the sale of $106.5 million as foreign exchange (FX) to 29 FX dealer banks.
In a statement signed by Dr Omolara Omotunde Duke, Director, Financial Markets Department, it was disclosed that on July 18 and 19, 2024, the CBN sold $106.5 million to 29 authorized dealer banks at exchange rates ranging from N1,498/$1 to N1,530.00/$1 and bought $9.5 million from four authorized dealer banks at rates between N1,510/$1 and N1,550/$1.
The central bank also stated that it had sold $122.67 million to 46 authorized dealers two weeks ago.
Nigeria’s central bank sold at least $377.17 million to authorized FX dealers in July.
The CBN plans to undertake a Retail Dutch Auction System (DAS) to mitigate the demand for eligible transactions through authorized dealers on Wednesday, 07 August 2024.