FX Market Turnover Drops 32% Amid CBN Reforms

Foreign exchange (FX) market turnover in Nigeria plunged by 32.28% in December 2024, falling to $9.74 billion from $14.39 billion in November, according to the FMDQ Exchange’s December Financial Markets Monthly Report.

The sharp decline reflects the impact of ongoing foreign exchange reforms and liquidity challenges as the Central Bank of Nigeria (CBN) intensified measures to stabilize the naira. Key policy interventions included adjustments in the Nigerian Autonomous Foreign Exchange Market and new FX inflow and outflow guidelines.

Despite the drop in turnover, the naira appreciated against the US dollar, strengthening by 6.55% to an average exchange rate of N1,564.97/$ in December from N1,667.41/$ in November. However, volatility increased, with the naira trading between N1,524.88/$ and N1,672.69/$ compared to November’s range of N1,639.50/$ to N1,690.37/$.

The FX market accounted for 37.36% of total spot market turnover in December, down from 41.15% in November. Overall, total spot market turnover across all financial instruments fell by 29.58% to N41 trillion, driven by declines in FX, fixed income, and money market transactions.

The fixed income segment saw a 22.98% drop in turnover to N13.83 trillion, while the money market turnover declined by 27.34% to N11.86 trillion, primarily due to reduced Repo/Buy-back transactions.

To enhance transparency and efficiency, the CBN introduced the new Electronic Foreign Exchange Matching System in December, mandating all interbank FX transactions to be conducted on the approved platform.

Market participants remain cautious amid heightened speculative activities as Nigeria’s FX market adjusts to the evolving regulatory landscape.