FX futures markets sit idle amid naira freefall

With the naira’s depreciation showing no signs of abating amid the scarcity of dollars in Nigeria, the foreign exchange futures markets remained idle this week.

An FX future is a contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.

“There were no trades executed in the Exchange-Traded FX Futures and extant Naira-Settled OTC FX Futures markets for the week-ended September 29, 2023,” the FMDQ, a securities exchange, said in a report on Saturday.

The naira extended its fall against the dollar this week, crossing the 1,000/$ mark on the parallel market while the official rate closed at N774.01/$ on Friday.

The total turnover in the FX spot and derivatives markets declined by 26.52 percent to $472.49 million from $643.06 million last week.

The decline in total turnover was jointly driven by the 26.38 percent and 37.96 percent decreases in FX spot and FX derivatives turnover, respectively, according to the report.

It said the decrease in FX derivatives turnover was solely driven by the 37.96 percent decrease in FX forwards turnover, while there was no activity in both the Exchange-Traded FX Futures and Naira-Settled OTC FX Futures markets.

The total value of transactions in the FX spot market fell to $467.57 million from $635.13 million last week.

“For the week ended September 29, 2023, the average Nigerian Autonomous Foreign Exchange Fixing rate was $/₦774.01, compared to $/₦771.14 recorded in the week ended September 22, 2023, representing a depreciation of the Naira against the United States dollar by 0.33 percent ($/₦2.54),” FMDQ said.

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