Forex Market Turbulence: NAFEM Witnesses Sharp Decline Amid Naira Depreciation

The Nigerian Autonomous Foreign Exchange Market (NAFEM) faced a dramatic 56% decline in forex transactions, plunging from $465.29 million to $203.93 million within a day, as reported by FMDQ Exchange. This abrupt reversal disrupts the recent upward trend in forex transactions, sparked by Central Bank of Nigeria (CBN) directives aimed at boosting market liquidity.

In a bid to stabilize the forex market, the CBN mandated banks to unload excess dollar reserves and enforce transparent reporting of forex trading data. Despite these measures, the naira experienced a 1.4% depreciation against the dollar at the parallel market on Thursday, driven by heightened demand for the US currency.

Black market exchange rates revealed the naira trading at N1,480 to a dollar, indicating a N20 drop from Wednesday’s rate of N1,460 per dollar. Bureau De Change (BDC) operators noted a consistent rise in the exchange rate, attributing it to persistent demand for the dollar.

Abdulahi Taura, a BDC operator, emphasized, “The dollar has increased to N1,480. People are still demanding it, and that’s why it’s increasing.” Similarly, Ibrahim Yahu reported a closing rate of N1,482 to the dollar on Thursday, highlighting ongoing demand for the US currency as a driving factor for rising rates.

The official forex market also witnessed the weakening of the naira, closing at N1,479.47 to a dollar, down from Wednesday’s rate of N1,434.53, according to FMDQ Exchange data. As the forex market faces turbulence, stay tuned for updates on the evolving dynamics impacting the Nigerian currency.

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