Nigerian Naira Exchange Rate Sees Slight Improvement Amidst Volatility
The foreign exchange market in Nigeria has experienced a significant surge in trading activities in July, with the turnover reaching a whopping N11.48 trillion ($7.39 billion) at the official trading window. This represents a 10.02% increase from the previous month’s N10.01 trillion, according to the Financial Markets Monthly Report published by the FMDQ, which houses the official foreign exchange trading platform.
In dollar terms, the FX market turnover in July recorded a $0.67 billion month-on-month increase from $6.72 billion in the prior month. This boost in trading activities has led to a slight improvement in the naira’s value against the dollar, with the spot exchange rate increasing by 4.88% (N72.58) to close at an average of $1,560.32 in July from $1,487.74 in June.
However, the exchange rate volatility also increased in July, with the local currency trading around $1,500.32-$1,621.12, compared to $1,473.66-$1,510.10 recorded in June 2024. At the end of the week, the value of the naira to the dollar appreciated by 62 basis points to N1570.14/$ to close the week at the NAFEM. The turnover stood at $120.81 million with an intra-day high and low of 1606/$ and 1496/$ respectively.
According to a recent report from the Central Bank of Nigeria (CBN), the average exchange rate of the naira against the dollar at the Nigerian Autonomous Foreign Exchange Market fell by 35.53% to $1,304.72 in the first quarter of 2024, compared to $841.15 in the last quarter of 2023.
Businesses surveyed expect the naira to continue depreciating in the next three months, starting in July, but expect it to appreciate after six months. The report said that respondent firms expect the naira to depreciate in the current month, next month, and next three months, but appreciate in the next six months, with their indices standing at -22.6 points, -16.5 points, -4.8 points, and 13.7 points, respectively.
The CBN has announced a surge in remittance inflows, reaching $553 million in July 2024, a 130.00% year-on-year increase compared to July 2023. The apex bank attributed the growth to recent policy initiatives aimed at boosting liquidity in Nigeria’s foreign exchange market, including the issuance of licenses to new international money transfer operators and the adoption of a willing buyer-willing seller model, which ensures IMTOs have timely access to naira liquidity.
Analysts at Meristem Research shared an optimistic outlook that remittance inflows would “continue their upward trajectory, supported by these policies and additional strategic efforts to enhance stability in the FX market.”
