According to an FMDQ report, foreign exchange turnover via the Nigerian Autonomous Foreign Exchange Market surged to N15.74 trillion ($9.90 billion) in August 2024. This increase coincided with the Central Bank of Nigeria’s revelation that foreign inflow into the country rose to $585 million during the same month.
At the official market on Tuesday, the naira’s value fell by N1 to N1,658 against the United States dollar from Monday’s rate of N1,659 at the official market on Tuesday. Meanwhile, black market sellers were trading at N1,670.
The CBN announced that the turnover via the Nigerian Autonomous Foreign Exchange Market experienced a notable month-on-month rise of 33.88 percent, increasing by N2.51 trillion from N13.23 trillion ($7.39 billion) in July 2024 to N15.74 trillion ($9.90 billion) in August 2024, as reported by the FMDQ.
In the same month, the CBN disclosed that foreign inflows into Nigeria surged to $585 million. This surge reflects heightened trading activity and investor engagement in the foreign exchange market.
Commercial banks, CBN, and international oil firms are the major sellers of forex at NAFEM. According to the financial markets monthly report for August published by the FMDQ and obtained by our correspondent on Tuesday, the increase in turnover was driven by the increase in T.bills, OMO Bills, and FGN Bonds transactions, while transactions in other bonds recorded a MoM decrease of 18.43per cent (N10bn).
Despite this increase, the naira experienced continued depreciation, contributing to increased exchange rate volatility.
The report read, “Spot FX market turnover was $9.90bn (N15.74tn) in August 2024, representing a 33.88 per cent ($2.51bn) MoM increase from the turnover recorded in July 2024 ($7.39bn).”
It also stated that total secondary market turnover on FMDQ Exchange was N40.43tn, which represents a MoM increase of 31.97 per cent (N9.79) and a YoY increase of 128.57 per cent ( 22.74tn) from July 2024 and August 2023 figures, respectively.”
The FMDQ added that foreign Exchange and Money Market transactions dominated secondary market activity, jointly accounting for 69.98 per cent of the total secondary market turnover in August 2024.
In August, the naira traded within a range of 1,543.84 to N1,617.08, indicating heightened fluctuations compared to the previous month’s range of 1,500.32 to N1,621.12.
It said the average spot exchange rate rose by 1.68 per cent (N26.24) to close at N1,586.56, compared to N1,560.32 in July.
“In the FX Market, the Naira depreciated against the US Dollar, with the spot exchange rate increasing by 1.68 per cent ($/N26.24) to close at an average of $/ N1,586.56 in August 2024 from $/N1,560.32 recorded in July 2024.
“Further, exchange rate volatility increased in August 2024 as the Naira traded within an exchange rate range of $/N1,543.84 – $/N1,617.08 compared to $/N1,500.32 – $/N1,621.12 recorded in July 2024.”
This increased volatility underscores the challenges facing the Naira amidst ongoing economic pressures, including inflation and shifts in global market dynamics.
Last month, the Central Bank of Nigeria auctioned $876.26m to end users through 26 commercial banks in its latest effort to strengthen the ailing Naira.
This policy led to a temporary appreciation of the Naira against the US Dollar, with the exchange rate adjusting to N1,596.52/$ from N1,601/$.
To alleviate rising demand pressures in the forex market and promote price discovery, the auction sold approximately $876.26 million.
The sales report showed visible benefits for businesses in the manufacturing sector, which secured dollars for importing spare parts, industrial raw materials, plain paper, pharmaceutical products, and equipment for breweries.
The value of the naira dropped by N1 to N1658 on Tuesday at the official market, against the United States dollar from N1659 on Monday, while black market sellers offered it at N1700.
Although, Olayemi Cardoso, CBN Governor stated that the value of the naira against international currencies cannot increase unless the fundamentals of forex expenses are addressed.
Speaking at a press briefing following the 297th Monetary Policy Committee meeting, Cardoso revealed that Nigeria’s external reserves had increased again, reaching $39.07 billion as of September 19, 2024. He emphasized that while the apex bank aims to unlock as many diversified sources as possible into the foreign exchange section, this strategy alone is insufficient and cannot replace addressing the fundamental issues.
He said, “The external reserve stood at US$39.07bn as at 19th September 2024 an increase of 17.4 per cent compared with US$33.28bn in the corresponding period of 2023. This represents 8 months of import cover for goods and services and 13 months of imports of goods only.”
“As of August, inflow from remittances was $585m and this is a big deal as it is 130 per cent for the corresponding period last year. These figures didn’t drop from the ceiling but our deliberate and calculated effort. We recognised that certain things were not happening. We liberalised the IMTOs and encouraged them to open accounts in naira and we are normally dealing with them regularly and this has incredibly paid off.
“But on the naira, I must tell you that since the strategy of the central bank is to unlock as many diversified sources. it is not enough and can never replace the fundamentals.”
The central bank governor further explained that as long as the country operates on a monolithic economy, achieving a strong exchange rate “that we all so desire” would continue to be hampered.
“Non-oil exports must also increase. Having an exchange rate that we all so desire will continue to be hampered. We need to diversify our economy to boost the naira. We may like to think or dream it can, but it can’t. Until the fundamentals are fixed and in place, you will continue to sub-optimise,”
“Oil production has got to be ramped up to the level that will carry the economy. I think we are all ongoing witnesses to the efforts that are being made in that sector. It has to happen. I spoke about the sad situation that we as Nigerians face today whereby we are a monolithic economy.
“We need to diversify our economy. There is so much that a central bank can do. Without the fundamentals in the right position, we will continue to sub- optimiser,” Cardoso added.
The CBN governor emphasized the necessity for Nigerians to develop strategies for achieving import substitution.
“It can not just be about import and we must be able to calibrate accordingly our taste for foreign goods,” Cardoso stated.
“These are all things that will determine essentially where we settle in respect to our foreign exchange rate.”
He said the central bank is determined to play its part in ensuring that the market operates efficiently while warning that the apex bank is ready to penalise “those who play the market”.
