In December 2024, the foreign exchange market turnover in Nigeria decreased by 32.28%, dropping to $9.74 billion from $14.39 billion in November. This decline, noted in the FMDQ Exchange’s December Financial Markets Monthly Report, reflects the impact of ongoing reforms in the foreign exchange market and broader liquidity challenges. The $4.64 billion month-on-month decrease in FX turnover coincided with efforts by the Central Bank of Nigeria to stabilize the naira through various policy measures. These reforms, including interventions in the Nigerian Autonomous Foreign Exchange Market and new guidelines for FX inflows and outflows, influenced trading volumes across FX instruments.
The FX market was the most affected sector of Nigeria’s financial markets in December, representing 37.36% of total spot market turnover, down from 41.15% in November. Despite the decreased turnover, the naira strengthened against the US dollar, with the average exchange rate improving to N1,564.97/$ from N1,667.41/$ in November, indicating a 6.55% appreciation of the local currency.
However, there was increased exchange rate volatility in December, with the naira trading within a range of N1,524.88/$ to N1,672.69/$, compared to N1,639.50/$ to N1,690.37/$ in November. This expanded trading band suggests heightened speculative activities and cautious behavior from FX market participants.
The overall contraction in Nigeria’s financial markets was influenced by a 29.58% decrease in total spot market turnover to N41 trillion in December, driven by declines in FX, fixed income, and money market transactions. The fixed income market experienced a 22.98% drop in turnover to N13.83 trillion, while the money market segment recorded a 27.34% decline in turnover to N11.86 trillion.
In December, the Central Bank of Nigeria introduced the new Electronic Foreign Exchange Matching System to enhance transparency, governance, and facilitate a market-driven exchange rate accessible to the public. This development aims to reduce speculative activities, eliminate market distortions, and enhance the CBN’s regulatory oversight of the market for effective regulation.