Drop in FX Market Liquidity Worsens Naira’s Weakening

The liquidity in Nigeria’s official foreign exchange market dropped by more than a third last week, exacerbating the depreciation of the naira against the dollar.

The average Nigerian Autonomous Foreign Exchange Fixing rate closed at ₦784.32/$, compared to ₦772.92/$ in the previous week, representing a depreciation of the naira against the dollar by 1.45 percent, according to FMDQ Securities Exchange.

The total turnover in the FX spot and derivatives markets fell by 37.12 percent  to $430.08 million from $683.97 million in the previous week. 

The decline in the total turnover was driven by the 39.06 percent ($266.72 million) decrease in FX spot turnover, despite an over 13-fold increase ($12.83 million) in FX derivatives turnover.

The increase in FX derivatives turnover was solely driven by FX forwards turnover, while there was no activity in both Exchange-Traded FX Futures and Cleared Naira-Settled Non-Deliverable Forwards markets.

“In the FX spot market, the total value of transactions for the week-ended October 20, 2023 was $416.20 million, representing a decrease of 39.06 percent ($266.72 million) from the value of transactions executed in the week-ended October 13, 2023 ($682.92 million),” FMDQ said.