FX Trading Slumps 30% in Nigeria Amid Dollar Supply Crunch and Market Caution
Nigeria’s foreign exchange (FX) market experienced a sharp slowdown last week, with total trading turnover plunging by more than 30%, according to data from FMDQ. Both spot and derivatives transactions were affected, highlighting continued caution among traders and corporates navigating an uncertain currency landscape.
Data for the week ending November 14 revealed that FX spot and derivatives turnover totaled $1.157 billion, down $504.61 million—or 30.36%—from $1.662 billion the previous week. The decline was largely driven by lower activity in the spot market, which forms the bulk of FX transactions in Africa’s largest economy. Spot trades alone fell by 30.11%, reflecting subdued market participation.
Traders attributed the slowdown to a combination of thin dollar supply, weaker corporate demand, and careful balance-sheet adjustments ahead of expected central bank policy updates. “Most dealers stayed on the sidelines this week. Supply was thinner, and clients were not as aggressive,” a senior currency trader in Lagos said. “Everyone is waiting for fresh guidance from the central bank.”
The derivatives segment also weakened, though its impact on overall turnover was smaller. FX derivatives, particularly forward contracts, fell by $6 million as some corporates scaled back hedging after earlier positions. Analysts say the figures highlight the lingering fragility in Nigeria’s FX market despite recent central bank reforms aimed at stabilizing the naira and improving investor confidence.
Looking ahead, market participants expect a modest rebound in FX activity as year-end dollar demand rises among importers, manufacturers, and multinationals. However, the pace of recovery will depend on the central bank’s liquidity interventions, clarity on interest rate direction, and foreign portfolio inflows. For now, the sharp week-on-week decline underscores the caution and volatility still defining Nigeria’s FX trading landscape.
source: The Sun