Nigeria recorded forex turnover of $2.18 billion at the Investors and Exporters window, where forex is traded officially, in the month of January 2022, representing a 50.8% decline compared to $4.44 billion that exchanged hands in the previous month.
This is according to data on the FMDQOTC collated by Nairalytics, the research arm of Nairametrics. Forex turnover at the FMDQOTC represents the total amount bought and sold at the official forex market in Nigeria.
The $2.18 billion forex turnover in January, however, represents a 90.3% increase when compared to $1.15 billion recorded in the corresponding period of 2021. Meanwhile, the official exchange rate appreciated by 4.5% to close the month at N415.33/$1 as opposed to N435 to a dollar recorded as of the end of the previous month.
A cursory look at the historic data shows an uptick in the volume of FX traded at the official market in mid-2021, which could be attributed to the ban of FX sales to Bureau De Change operators by the CBN, indicating more liquidity to channel through the official market.
Dwindling FX inflow from crude export
Nigeria has endured FX shortages since the covid-19 pandemic struck in 2020, leading to multiple devaluations of the local currencies whilst the apex bank continues to intervene in the official market.
However, the country was able to raise $4 billion last year through the issuance of Eurobond, which increased Nigeria’s foreign reserve above the $40 billion threshold in October 2021, reaching a high of $41.83 billion as of 29th October 2021 before sliding downwards to $40.12 billion as of 28th January 2022.
Nigeria has been unable to rejuvenate its forex earnings through the sales of crude oil product, which accounts for about 90% of foreign exchange income, as a result of the inability to increase production quota despite the rally at the global market.
Crude oil is currently trading above $90 per barrel at the global crude oil market, however, Nigeria is not able to tap from this bullish oil market, as its production quota is hovering around 1.4mbpd. Meanwhile, it is worth noting that its production level is reported to have improved by 50,000bpd in December 2021 albeit below the monthly rate of 1.6mbpd.
What you should know
Forex turnover refers to the amount of forex that exchanged hands in the official Investors and Exporters window, which is the recognized channel for trading FX in Nigeria.
- FX turnover in January 2022 represents its lowest level since April 2021, before the CBN discontinued the sales of FX to BDCs in the country.
- Nairametrics reported that a sum of $32.3 billion in FX was transacted at the official forex market in 2021.
- The disparity between the official market and the parallel market increased to N152/$ from N130/$ recorded as of the previous month. Naira currently trades at N568/$1 at the parallel market.
