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Nigeria’s foreign exchange (FX) market recorded a sharp decline in activity last week with total turnover falling more than 30 per cent as both spot and derivatives transactions weakened, data from FMDQ revealed.
According to the data, FX Spot and derivatives turnover for the week ended Nov. 14 stood at $1.157 billion, down 30.36 per cent, or $504.61 million, from $1.662 billion reported a week earlier.
The drop was mainly driven by lower spot market activity, which typically accounts for the bulk of weekly FX flows in Africa’s largest economy. Spot transactions totaled $1.157 billion, representing a 30.11 per cent decline (or $498.61 million) from $1.656 billion recorded in the week ended Nov. 7.
Traders said the slowdown reflected subdued dollar supply, softer corporate demand and ongoing caution among banks as they adjusted balance-sheet positions ahead of anticipated monetary policy signals. Nigeria has witnessed bouts of volatility in the FX market this year following a series of central bank reforms aimed at improving transparency and attracting foreign inflows.
“Most dealers stayed on the sidelines this week. Supply was thinner and clients were not as aggressive in taking positions,” a senior currency trader at a Lagos-based bank said. “Everyone is waiting for fresh guidance from the central bank and more clarity on how liquidity will evolve towards year-end.”
The derivatives segment also weakened, though its impact on total turnover was marginal compared with the spot market. FX Derivatives transactions fell by $6 million, entirely due to a decline in FX Forwards turnover, the data revealed. This meant that some corporates scaled back hedging contracts after locking in sizeable positions earlier in the month.
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Nigeria has been attempting to stabilise the naira after years of chronic dollar shortages that have weighed on investor confidence and slowed foreign direct investment. The Central Bank of Nigeria (CBN) has introduced a series of policy adjustments since 2023, including unifying its multiple exchange rates, clearing verified FX backlogs and tightening monetary conditions to curb inflation.
Despite these reforms, the FX market remains sensitive to fluctuations in oil prices, portfolio flows and seasonal dollar demand. External reserves have also come under intermittent pressure, adding to uncertainty among market participants.
Analysts say the latest turnover figures highlight lingering fragility in the supply-demand balance, even as policymakers continue efforts to restore investor confidence. “Volatility is still a key feature of Nigeria’s FX landscape,” said an economist at a Lagos-based investment firm. “The contraction in turnover shows participants are wary, and liquidity conditions remain uneven across trading windows.”
Market players expect activity to pick up slightly in the coming weeks as importers, manufacturers and multinationals begin year-end dollar purchases. However, dealers say the extent of that rebound will depend on the central bank’s liquidity injections, clarity on interest rate direction and the pace of foreign portfolio inflows.
For now, the sharp week-on-week decline highlights the caution prevailing in the market as traders navigate limited supply, macroeconomic uncertainties and shifting policy expectations.
