NAFEM Turnover Climbs to $1.41bn as Foreign Exchange Trading Rebounds

By Benson Daniel

Turnover on the Nigerian Autonomous Foreign Exchange Market rose sharply to $1.41 billion on August 17, marking a five week high as trading activity in the official foreign exchange market rebounded after a period of weaker transactions.

The latest increase represents a significant recovery in market activity following the sharp decline recorded earlier in August, when daily turnover dropped to about $185 million on August 11, its lowest level in 11 weeks.

The rebound highlights the highly volatile nature of activity in Nigeria’s foreign exchange market, where transaction volumes have fluctuated considerably in recent weeks. Turnover had also risen strongly during the week ended August 7, when total FX market activity reached about $3.73 billion.

The renewed increase in trading comes as market participants continue to respond to changing foreign exchange demand and supply conditions. Improved liquidity has remained an important factor in supporting stability in the official market, even as businesses and investors continue to monitor movements in the naira.

The naira has traded within a relatively narrow range during August compared with some of the volatility witnessed earlier in the year. The currency closed at around N1,360 per dollar in the middle of the month, reflecting improved stability in the official market.

Nigeria’s external reserves have also continued to provide support for foreign exchange liquidity. Reserves rose above $52 billion in the first part of August, strengthening the country’s external position and providing an additional buffer for the currency market.

The rise in NAFEM turnover is particularly significant because stronger trading activity generally indicates increased participation by banks, investors, businesses and other authorised market participants. Higher transaction volumes can also improve price discovery and contribute to a more transparent determination of the exchange rate.

However, increased turnover does not necessarily translate into a stronger naira, as the direction of the currency continues to depend on the balance between foreign exchange supply and demand.

The Central Bank of Nigeria has continued to implement measures aimed at deepening the foreign exchange and financial markets while improving liquidity management. Recent adjustments to access to the central bank’s discount window and other money market operations have also been designed to improve market functioning.

For businesses that rely heavily on imported raw materials, machinery and other foreign inputs, developments in the official FX market remain critical. Greater liquidity and improved exchange rate stability could help companies plan their transactions more effectively and reduce uncertainty around the cost of accessing dollars.

The latest surge in turnover therefore signals renewed activity in the official market, although sustained stability will depend on whether the increased participation is accompanied by consistent foreign exchange supply.

Market participants are expected to continue watching the naira’s movement, reserve accumulation, foreign portfolio flows and broader economic conditions as indicators of whether the recent improvement in FX activity can be sustained.