Nigeria’s foreign exchange market turnover plummeted in April, according to the latest FMDQ Exchange report. Total spot forex turnover nosedived 27.68% from March levels to $9.12 billion amid a dramatic strengthening of the naira against the U.S. dollar.
The average $/NGN spot rate crashed over 22% to 1,244.66 in April compared to 1,524.04 the prior month as the local currency staged a remarkable rally. However, naira volatility ticked higher as the currency’s trading range widened to $/₦1,072.74 – $/₦1,419.11 versus the previous month’s $/₦1,300.43 – $/₦1,627.40 range.
Forex derivatives trading volumes also cratered, with total futures and forwards turnover plunging nearly 70% month-on-month to $1.18 billion. Within that, FX swaps sank 61% to $1.09 billion while forwards collapsed over 90% to just $90 million as market liquidity dried up.
In the Cleared Naira-Settled USD/NGN Non-Deliverable Forwards (NDF) market, open positions contracted further. Outstanding NDF notional value fell by nearly 24% from March to $1.59 billion as the naira’s spot surge caused implied future rates to reprice lower. No new long-dated NDF contracts were listed for the month.
Overall trading on FMDQ’s platform shriveled by 39.68% from the prior month to 26.06 trillion naira as turnover dropped sharply across forex, fixed income and money markets. The downturn coincided with lower issuance of sovereign debt securities by the government.
While delivering some respite on import costs, the naira’s abrupt appreciation against the dollar raises concerns around Nigeria’s export competitiveness and foreign inflows. Market analysts will closely watch whether the central bank opts to support the currency after April’s outsized move.
