Foreign exchange turnover in Nigeria’s autonomous market soared to N15.74 trillion ($9.90 billion) in August 2024, marking a 33.88% rise from July’s N13.23 trillion ($7.39 billion), according to a report by the Financial Markets Dealers Quotations (FMDQ). This significant increase reflects heightened activity and investor engagement in the forex market.
However, despite the surge in forex transactions, the naira continued its downward spiral, depreciating to N1,658 per US dollar in the official market on Tuesday, down from N1,659 on Monday. In the parallel market, the naira was traded at N1,700.
The Central Bank of Nigeria (CBN) also reported an uptick in foreign inflows, which reached $585 million in August, a significant boost from the corresponding period last year. The central bank’s efforts to stabilize the naira through regular dollar auctions have brought temporary relief, but exchange rate volatility remains a major concern.
FMDQ’s report attributed the sharp rise in forex turnover to increased transactions in Treasury Bills, Open Market Operation (OMO) Bills, and Federal Government Bonds. Despite this, the naira experienced heightened fluctuations, trading between N1,543.84 and N1,617.08 during August, compared to a range of N1,500.32 to N1,621.12 in July. The average spot exchange rate for the naira increased by 1.68% to close at N1,586.56 in August.
In an effort to meet rising demand for forex, the CBN auctioned $876.26 million to end users via 26 commercial banks, providing temporary support to the ailing currency. This auction helped manufacturing businesses secure dollars for the importation of key raw materials, industrial equipment, and pharmaceutical products. However, the naira only briefly appreciated to N1,596.52 per dollar before slipping back.
At a recent Monetary Policy Committee meeting, CBN Governor Olayemi Cardoso stressed that achieving a stable and stronger naira would remain elusive unless Nigeria addressed the structural weaknesses in its economy. He highlighted the need for economic diversification, stating that the country’s over-reliance on oil exports was limiting its ability to achieve a sustainable exchange rate.
Cardoso also revealed that Nigeria’s external reserves had increased to $39.07 billion by mid-September, providing eight months of import cover for goods and services. Despite this positive development, he reiterated that addressing fundamental economic issues, such as boosting non-oil exports and ramping up domestic oil production, was crucial for long-term stability.
“As long as we operate a monolithic economy, achieving the strong exchange rate we all desire will continue to be a challenge,” Cardoso said, calling for a collective push toward economic reforms that would stabilize the naira and reduce the country’s dependence on imports.
The CBN remains committed to liberalizing remittance inflows, which saw a 130% increase in August compared to the previous year, contributing to the improved foreign exchange reserves. However, Cardoso cautioned that such measures, while impactful, are not enough to resolve the fundamental issues affecting the naira’s value.
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