The naira exhibited signs of moderate stability as foreign exchange (FX) turnover surged by 138.67% on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window.
On Tuesday, 11 June 2024, the closing rate for the naira was 1,473.66/$1, which was an appreciation of 0.68% from the 1,483.62/$1 recorded from previous trading day.
This slight appreciation indicated a momentary stabilization in the exchange rate, offering a degree of reassurance to market participants.
Also, the gradual improvement in the closing rates over these two days points to a potential stabilizing trend in the foreign exchange market.
Rise in FX turnover
A key aspect of the recent forex market activity has been the notable fluctuations in forex turnover.
On June 10, 2024, forex turnover was recorded at $161.69 million, reflecting a substantial decline of 39.95%.
This sharp decrease might have raised concerns about liquidity constraints or market sentiment shifts, indicating possible underlying uncertainties in the market.
However, contrary to the preceding day’s trend, June 11, 2024, witnessed a significant surge in forex turnover, which soared to $385.91 million.
This increase of 138.67% is significant, suggesting a rebound in market activity and possibly a renewed confidence among market participants.
The factors contributing to this surge could range from policy interventions, shifts in market sentiment, or broader economic developments influencing trading volumes.
Trading range
The naira further displayed moderate stability as it traded within a relatively narrow range, with a high of N1,495/$1 and a low of N1,415/$1. The naira traded below previous highs of over N1,500/$1.
This trading range indicates a level of resilience and stability in the Naira’s exchange rate, even as turnover volumes experienced significant volatility.
Such stability is crucial for market confidence and economic planning, as it reduces the unpredictability associated with exchange rate movements.
What you should know
- Despite these positive indicators, the Nigerian economy still faces considerable hurdles. Inflation remains high, and external economic pressures, including fluctuating oil prices and global market uncertainties, continue to pose risks.
- Moreover, ensuring a consistent supply of foreign exchange to meet the market’s demand will require ongoing efforts and strategic interventions.
- Following the unification of the FX market in June 2023 and the subsequent depreciation of the naira, the federal government through the NNPC secured the $3.3 billion crude oil-backed loan facility from the African Export-Import Bank (Afrexim Bank). The National Economic Council (NEC) had explained last year that it was confident the loan would help stabilize the forex market in light of the severe volatility.
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