Forex Market: NAFEM Turnover Soars by 61% to $43bn in 2024, Naira Faces Mixed Performance

The Nigerian Foreign Exchange Market (NAFEM) has seen an impressive 61.9% rise in turnover year-on-year, reaching $43.09 billion in the first eleven months of 2024 (11M’24), compared to $26.6 billion in the same period of 2023. This significant increase highlights a surge in activity within the forex market as the country navigates economic fluctuations and a volatile global financial environment.

Quarterly Trends in Forex Market Activity 📉📈

The NAFEM turnover reached $12.64 billion in the first quarter of 2024 (Q1’24), but saw a quarter-on-quarter (QoQ) decline of 19% in the second quarter, dropping to $10.24 billion. This downward trend continued into Q3’24, where turnover declined by a slight 0.87%, reaching $10.15 billion.

However, a strong rebound occurred in October, with turnover increasing by 63% month-on-month (MoM) to $5.4 billion, up from $3.31 billion in September. The growth continued in November, with a 13.5% increase, bringing the monthly turnover to $6.13 billion.

Mixed Performance for the Naira 💸

Despite the growth in forex turnover, the Naira recorded mixed results in the market. At the NAFEM, the local currency appreciated by N2.8 or 0.16%, closing at N1,672.69 per dollar at the end of November, compared to N1,675.49 per dollar in October.

However, the Naira experienced a depreciation of N10 or 0.5% in the parallel market, where the exchange rate closed at N1,745 per dollar in November, up from N1,730 per dollar in October. As a result, the margin between the NAFEM rate and the parallel market widened, growing to N72.31 per dollar in November, from N54.61 in October.

Central Bank Responds to Exchange Rate Pressure 🏦

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) expressed concern over the continued pressure on the exchange rate. They noted the high demand in the forex market and urged the CBN to explore measures to boost liquidity in the market. The MPC emphasized the need to stabilize the exchange rate by addressing the factors contributing to the liquidity shortfall.

Outlook for Naira and NAFEM in 2024 📅

As NAFEM turnover continues to grow and the Naira faces fluctuations in both official and parallel markets, experts will be watching closely for any additional measures from the CBN to address the growing pressure on the currency. The widening gap between the official and parallel rates suggests that further steps may be needed to stabilize the forex market and ensure a more predictable exchange rate.