The daily foreign exchange turnover at NAFEX, the official platform where forex is traded, dropped to $84.3 million, representing the lowest point in approximately ten weeks.
This decline was highlighted by the latest trading data from FMDQ, which Nairametrics has been tracking since the inception of the official forex market.
Prior to yesterday, the record low daily turnover was $66.4 million, which occurred on February 19, 2024.
Despite the dip, the FMDQ reported a daily turnover of $86.6 million on April 19, 2024. The month also witnessed a significant spike with a daily turnover reaching $309 million on April 26, 2024.
Importance of Daily Turnover: The daily turnover is a crucial indicator of forex liquidity in the official market, as it reflects the volume of trades executed on the exchange. This metric is vital for understanding market dynamics and guiding investment and economic decisions.
Naira Strengthens amidst forex challenges
On the first day of the week, the official exchange rate strengthened, closing at N1,354.21 against the dollar— the strongest the Naira has been in May.
- The exchange rate commenced the month at N1,402.67 in the official market, showing a slight depreciation compared to the parallel market, where it hovered just under N1,400/$1.
- Throughout the day, the Naira fluctuated, reaching an intra-day high of N1,441/$1 and a low of N1,285/$1.
- On the parallel market where the exchange rate is sold unofficially, operators quoted at exchange rate of around N1450/$1, lower than the official exchange rate of NN1,354.21/$1.
- Meanwhile the external reserves remain unchanged at $32.3 billion as of May 3, 2024.
Nigeria’s forex challenges
Nigeria’s forex market has faced significant challenges, primarily due to fluctuations in global oil prices and economic policies that affect liquidity.
- The country relies heavily on oil exports, and any volatility in global oil markets directly impacts its foreign exchange reserves.
- Additionally, restrictive foreign exchange policies have sometimes exacerbated liquidity problems, leading to disparities between the official and parallel market rates.
- However recent central bank policies have reversed the course of foreign exchange transactions in Nigeria as the central bank moved to a market determined forex market.
- However, this switch has proven challenging for monetary authorities due to a myraid of challenges within and outside the control of the apex bank.
Despite recent volatility in the exchange rate, the Naira has shown signs of recovery, strengthening from a low of N1,600/$1 recorded in March.
This appreciation of the Naira has had positive ripple effects across the economy, including a decrease in customs duties.
Furthermore, in a recent development, electricity distribution companies have announced a reduction in tariffs, attributing this change to the strengthening of the Naira. Tariffs were initially increased citing an exchange rate of N1,463.3/$1. (Nairametrics)
