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The nation’s foreign exchange market saw a notable contraction in December 2024, as turnover slid by 32.28% to $9.74 billion, down from $14.39 billion in November. This downturn, occurring alongside intensified forex policies, points to liquidity constraints and shifting investor sentiments.
The December Financial Markets Monthly Report from the FMDQ Exchange has revealed a sharp $4.64 billion drop in FX turnover, reflecting the pressures of continued foreign exchange market adjustments and tightening liquidity conditions. This development coincides with the Central Bank of Nigeria’s heightened push to stabilize the naira through a series of policy directives.
With regulatory changes targeting the Nigerian Autonomous Foreign Exchange Market and adjustments to FX inflow and outflow policies, trading volumes across FX instruments experienced notable shifts. Consequently, the foreign exchange market bore the brunt of these reforms in December, making up 37.36% of the total spot market turnover.
Compared to its 41.15% share in November, the FX market’s contribution to total spot turnover declined, reinforcing the contraction in trading volumes. Yet, in contrast to this trend, the naira appreciated against the US dollar, strengthening to an average exchange rate of N1,564.97/$ from N1,667.41/$ in November.
This represents a 6.55 per cent (N102.44) appreciation of the local currency.
However, the report gotten on Friday, noted increased exchange rate volatility in December, with the naira trading within a range of N1,524.88/$ to N1,672.69/$, compared to N1,639.50/$ to N1,690.37/$ in November.
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The widened trading band suggests heightened speculative activities and a cautious approach from FX market participants.
The report read, “Spot FX market turnover was $9.74bn (N15.32trn) in December 2024, representing a 32.28% ($4.64bn) MoM decrease from the turnover recorded in November 2024 ($14.39bn).
“In the FX Market, the naira appreciated against the US Dollar, with the spot exchange rate ($/N) decreasing by 6.55% ($/N102.44) to close at an average of $/N1,564.97 in December 2024 from $/1,667.41 recorded in November 2024.
“Further, exchange rate volatility increased in December 2024, with the Naira trading within an exchange rate range of $/N1,524.88 – $/N1,672.69 compared to $/N1,639.50 – $/N1,690.37 recorded in November 2024.”
