Nigeria’s foreign exchange market records high dollar supply as naira recovers

The Nigerian foreign exchange market has recorded a surge in forex supplies, which has led to the recovery of the Nigerian currency for the third day in a row.

Official figures from the FMDQ Exchange put the total Forex turnover in the market on Tuesday, May 21, 2024, at $268.19 million, which has led to the naira maintaining stability in the market.

The FX market experiences a surge in supplies

The figure represents an over 60% increase from the previous day at $161.41 million.

The current rate shows improved liquidity in the market, which analysts believe will spur further appreciation of the naira.

The improved turnover led to the naira recovering. It appreciated marginally against the US dollar to trade at N1,465.68 per dollar on Tuesday, May 21, 2024, as against N1,468.99.

FMDQ Exchange data shows that traders quoted the dollar at a high of N1,549 per dollar and a low of N1,401.

The naira falls in the parallel market

Meanwhile, traders in the parallel market quoted the dollar's buying rate at N1,500 per dollar, reports say, representing a 1.4% decline from the previous rate.

Reports say the pressure on the naira has been due to tight FX liquidity in markets, which has affected supplies to Bureau de Change (BDC) operators.

In almost one month, the Central Bank of Nigeria has not supplied the operators with forex, which they blame for the falling value of the naira.

Financial analyst and journalist Ishaya Ibrahim attributed Nigeria's lack of forex to low exports.

CBN commits to double inflows

He said Nigeria barely earns enough forex to impact the naira’s value and that low crude oil output has affected foreign reserves.

“We know that reserves act as a buffer to the naira’s stability and when it is low, it reflects on the value of the naira. So Nigeria needs to shore up its FX reserves by exporting, not just crude oil, but other products.”

The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, said international money transfer operators (IMTOs) identified charges and volatile exchange rates as reasons for the naira’s poor performance.

Cardoso revealed this and said the CBN collaborated with the IMTOs to double remittance inflows from formal sources into Nigeria.

The apex bank approved 14 new IMTOs to help double FX remittances into the country.