Nigeria's foreign exchange market experienced a severe pullback in the week ended 6 November, with turnover plummeting 51.29 per cent to $1.81bn from $3.71bn the previous week, according to data from FMDQ, which tracks transactions between authorised dealers and their customers. The $1.90bn decline in weekly trading value represents a steeper contraction than the 46.57 per cent weekly drop recorded in July, when turnover fell to $1.63bn. Average daily FX turnover fell to $361.67m from $742.51m in the preceding week.
Spot transactions, which involve immediate or near-immediate delivery of foreign currency, drove the overall decline. Spot turnover fell by 50.91 per cent to $1.79bn from $3.64bn, accounting for approximately 97.3 per cent of the overall reduction in dollar trading. The segment represented 98.77 per cent of total FX turnover during the week, up from 98.01 per cent previously. Average daily spot transactions declined to $357.23m from $727.74m. Forward transactions weakened more sharply, falling by 69.93 per cent to $22.20m from $73.83m, with average daily forward turnover dropping to $4.44m from $14.77m.
Forward exchange rates depreciated across all reported maturities, signalling continued expectations of naira weakness. The one-month forward rate depreciated by 0.2 per cent to N1,370.19 per dollar, the three-month rate weakened by the same margin to N1,405.78, and the six-month rate fell by 0.2 per cent to N1,455.88. The one-year forward rate depreciated by 0.6 per cent to N1,557.65 per dollar, recording the largest percentage movement among the reported tenors.
Analysts expect the naira to remain relatively stable in the near term, supported by FX reserves and Nigeria's current account surplus. The domestic financial market is anticipated to receive N148.57bn from Treasury bills maturities and N774.53bn from Open Market Operations maturities during the week. The combined N923.10bn inflow could influence liquidity conditions and investors' demand for foreign currency, depending on how the funds are reinvested.
For borrowers and businesses relying on foreign currency access, the sharp fall in FX trading activity may affect the ease and cost of obtaining dollars in the near term, while savers holding naira assets face continued depreciation signals from forward markets.