Nigeria’s currency, the naira, closed the week on a weaker note at the official foreign exchange market, even as trading activity and the country’s external reserves continued to improve.
Latest data released by the Central Bank of Nigeria showed that the naira lost value against the United States dollar during the week. The exchange rate closed at N1,371.04 per dollar on Friday, compared to N1,361.39 recorded the previous Friday. This represents a depreciation of N9.65 or about 0.70 percent within one week.
Despite the decline in the value of the naira, activity at the Nigerian Foreign Exchange Market (NFEM) increased significantly. Market turnover rose sharply to $509.22 million as of Thursday, representing a 249.16 percent increase when compared to the $145.84 million recorded in the previous week.
The rise in turnover suggests that more foreign exchange transactions took place during the week, reflecting improved liquidity in the market. Analysts believe higher liquidity often helps stabilize the market by making foreign currency more available to businesses and investors.
However, while total weekly turnover improved, daily trading activity slowed toward the end of the week. Data showed that turnover dropped by 36.6 percent day-on-day, falling from $802.79 million on Wednesday to $509.22 million on Thursday.
The number of completed transactions in the market also declined. NFEM recorded 289 deals on Thursday, lower than the 327 deals completed during the same period the previous week. This represented an 11.6 percent decrease. Compared to Wednesday’s 347 transactions, Thursday’s figure also reflected a 16.7 percent decline.
Activity in the interbank segment of the foreign exchange market weakened even further. Interbank deals dropped to 58 on Friday, showing a 36.3 percent decrease from the 91 deals recorded the previous week. Compared to Thursday’s 103 deals, the figure also represented a sharp 43.7 percent decline.
The latest figures indicate that although there was stronger overall liquidity in the foreign exchange market during the week, actual trading frequency and daily market participation reduced. This combination of lower transaction activity and weaker market momentum coincided with the gradual depreciation of the naira.
Economic experts say the performance of the naira remains closely tied to factors such as foreign exchange inflows, investor confidence, crude oil earnings, and monetary policies introduced by the Central Bank of Nigeria.
In recent months, the apex bank has introduced several reforms aimed at stabilizing the foreign exchange market and attracting more foreign investment into the economy. While some progress has been seen in liquidity levels and reserve growth, pressure on the naira still persists due to strong demand for dollars across different sectors of the economy.
Market observers are expected to continue monitoring the movement of the naira and the level of activity in the foreign exchange market in the coming weeks.
