FX forwards contracts rise as naira falls further

With no end in sight to the depreciation of the naira against the dollar, there was an increase in foreign exchange forwards contracts this week. 

An FX forward is a contractual agreement between a client and a bank, or a non-bank provider, to exchange a pair of currencies at a set rate on a future date.

The total turnover in the FX spot and derivatives markets, the total turnover rose by 25.16 percent to $678.24 million this week from $541.91 million last week, according to FMDQ Securities Exchange. 

The increase in the total turnover was jointly driven by the 24.33 percent ($128.11 million) and 53.34 percent ($8.22 million) increases in FX spot and derivatives turnover, respectively.

The increase in FX derivatives turnover was solely driven by the 53.34 percent ($8.22 million) increase in FX forwards turnover, whilst there were no trades executed in both Exchange-Traded FX Futures and Cleared Naira-Settled Non-Deliverable Forwards markets.

It said: “In the FX Spot market, the total value of transactions for the week-ended November 10, 2023, was $654.61 million, representing an increase of 24.33% ($128.11 million) from the value of transactions executed in the week-ended November 3, 2023 ($526.50 million).

“For the week-ended November 10, 2023, the average Nigerian Autonomous Foreign Exchange Fixing rate was $/₦839.74, compared to $/₦824.73 recorded in the week-ended November 3, 2023, representing a depreciation of the Naira against the United States (US) Dollar by 1.79% ($/₦15.01).”

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