The foreign exchange (FX) turnover on the Nigerian official market crashed by 75.98%, hitting a three-week low on Thursday.
It went from $385.91 million at the end of the last trading session on Tuesday to $92.68 million.
There was no record of forex trading on the official market on Wednesday due to the public holiday to celebrate Nigeria’s Democracy Day, which is done annually on June 12.
The turnover hit its lowest level since May 17, 2024, when it went as low as $83.5 million following a 69.40% crash that day.
This crash in FX turnover is the second since June 6, 2024, when Afrexim Bank announced the disbursement of $925 million- another tranche of the $3.3 billion crude oil-backed loan agreement it entered into with the Nigerian National Petroleum Company Limited (NNPC) last year.
The bank disclosed this in a statement on its website stating that the current disbursement brings the total payment for the facility to $3.175 billion.
The bank explained that the current payment was raised from crude oil off-takers like Oando Group and Sahara Energy as well as others.
Naira records slight depreciation
In tandem with the FX turnover crash, the latest data from the FMDQ reveals that on June 6, 2024, the naira stood at N1,476.24/$1, reflecting a 0.17% decrease from the previous rate of N1,473.66/$1 on the NAFEM window.
This depreciation, although seemingly minor in percentage terms, indicates ongoing pressures on the naira amidst a fluctuating foreign exchange market.
On Thursday, the naira traded within a broad range, hitting a high of N1,500/$1 and a low of N1,400/$1. This wide trading range highlights the significant volatility within a single trading day, reflecting market responses to varying supply and demand dynamics.
Such fluctuations are common in an environment where external economic factors, policy announcements, and global market trends impact currency stability.
More Insights
The significant reduction in FX turnover underscores ongoing volatility and challenges within Nigeria’s foreign exchange market. Such drastic fluctuations can disrupt financial planning and operations for businesses reliant on stable exchange rates.
The reduced turnover is indicative of broader market uncertainties and possibly reduced liquidity or trading activities.
The depreciation of the naira and the crash in FX turnover can be linked to multiple factors, including macroeconomic challenges, policy decisions, and external economic pressures.
There is a need for robust economic policies to stabilize the foreign exchange market and support the naira.
Addressing underlying economic issues, enhancing forex reserves, and implementing effective monetary policies will be crucial in mitigating such drastic market fluctuations and ensuring long-term economic stability.
The combination of these strategies will help restore confidence in Nigeria’s financial markets and support sustainable economic growth.
