A report from the Financial Markets Dealers Quotations (FMDQ) disclosed an increase in the value of foreign exchange turnover through the Nigerian Autonomous Foreign Exchange Market (NAFEM) to N15.74tn ($9.90bn).
This represents a 33.88% month-on-month increase from July’s turnover of N13.23tn ($7.39bn), adding N2.51tn to the market.
Simultaneously, the Central Bank of Nigeria (CBN) reported a significant increase in foreign inflows, which reached $585m in the same month.
However, despite these positive developments, the value of the naira continued to depreciate, dropping to N1,658 per US dollar on Tuesday, compared to N1,659 the previous day.
In the black market, the exchange rate was even higher, with sellers offering the naira at N1,700 per dollar.
The CBN noted that the impressive foreign exchange turnover reflects increased trading activity and investor engagement.
Major contributors to the turnover include transactions in Treasury Bills, Open Market Operation (OMO) Bills, and Federal Government of Nigeria (FGN) Bonds, while other bond transactions recorded a slight decrease of 18.43% month-on-month (N10bn).
Despite these gains, the naira experienced continued depreciation, with its spot exchange rate increasing by 1.68% (N26.24) to close at an average of N1,586.56 per dollar in August, up from N1,560.32 in July.
The currency traded within a range of N1,543.84 to N1,617.08, indicating heightened volatility compared to the previous month’s range of N1,500.32 to N1,621.12.
The CBN took measures to address the pressure on the naira, auctioning $876.26m to end-users through 26 commercial banks. This move provided temporary relief, with the naira briefly appreciating to N1,596.52/$ from N1,601/$.
The manufacturing sector benefited significantly from the auction, with businesses securing foreign currency to import spare parts, industrial raw materials, pharmaceutical products, and equipment for breweries.
Despite these efforts, CBN Governor Olayemi Cardoso highlighted that the value of the naira cannot improve without addressing fundamental issues in Nigeria’s forex spending.
Speaking at the end of the 297th Monetary Policy Committee meeting, Cardoso noted that Nigeria’s external reserves had increased to $39.07bn as of September 19, 2024, up 17.4% from the same period in 2023.
However, he stressed that economic diversification is key to stabilising the naira, particularly by boosting non-oil exports and reducing reliance on imports.
Cardoso emphasized that while the central bank continues to liberalise inflows and promote remittances, achieving a stable and strong exchange rate requires fixing underlying economic fundamentals.
He urged for greater efforts in achieving import substitution and warned that without these measures, the naira’s value would remain vulnerable to fluctuations.
The CBN Governor also cautioned that the apex bank is prepared to penalise market manipulators, reiterating the bank’s commitment to ensuring an efficient forex market.
