The adoption of a single foreign exchange rate for public and private sector transactions by the Central Bank of Nigeria (CBN), FMDQ and banks has boosted monthly turnover by 94 per cent.
The implementation of the new market initiatives has led to an increase in the turnover recorded in the FX market, from an average monthly turnover of $1.30 billion in January to April 2021 to $2.52 billion in May 2021, a statement by FMDQ Securities Exchange Limited said on Monday.
It added that the number of executed trades also jumped from an average monthly number of 6,733 trades in January to April, to 6,949 trades in May.
FMDQ said it collaborated with the Central Bank of Nigeria (CBN) and forex authorised dealers (banks) to activate an on-system trading and reporting of all FX transactions in the market.
The partners, according to the statement, also adopted a single market-driven rate last month, as part of the FMDQ-advised FX Trading System.
The foreign exchange market remains one of the largest, and perhaps, the most crucial segment of the Nigerian financial market, with an average annual turnover of $45.85bn over the last four years.
Despite the high market turnover, it noted that activities in this market were constrained by limited transparency and volatile capital flows, leading to market fragmentation and multiple exchange rates.
It added that activity levels fluctuated alternately between the formal and regulated market segments, and the unregulated (parallel) market.
Speaking on the new development in the forex market, the Chief Executive Officer, FMDQ Group, Mr. Bola Onadele. Koko, said the renewed confidence and depth in the FX market will improve the attractiveness of the Nigerian market to foreign portfolio investors.
“FMDQ is excited at the introduction of market-building initiatives by the CBN to ensure the further development of the FX market, in recognition that a liquid, transparent and credible FX market is a major precursor for increased inflows into the Nigerian financial market,” he said.
“FMDQ remains committed to institutionalising structures – efficient processes, systems, etc., in collaboration with market stakeholders, to support initiatives towards delivering a thriving FX market that is well-positioned to support the Nigerian economy.”
While addressing the market, the CBN Governor, Mr Godwin Emefiele, emphasised the importance of a transparent and credible FX market.
He reiterated the CBN’s commitment to implementing market-enhancing initiatives required to inspire confidence towards sustaining and deepening the Nigerian FX market.