FMDQ FX turnover dips by 16.5 per cent in one week

Foreign Exchange Spot and Derivatives markets’ turnover for the week ended August 2, 2024, was $1,087.33 million, representing a decrease of 16.5 per cent or $215.24 million from $1,302.57 million recorded on July 26, 2024.

According to FMDQ Securities Exchange, the week-on-week (WoW) decrease in total turnover was driven by the 16.8 per cent ($218.85 million) decrease in FX spot turnover, which recorded a total value of $1,083.72 million, compared to $1,302.57 million recorded in the week ended July 26, 2024, offsetting the $3.61 million increase in FX Derivatives turnover.

The exchange noted that the Week-on-Week (WoW) increase in FX Derivatives turnover was solely driven by the $3.61 million increase in FX Forwards turnover, while there was a continued lack of activity in both the exchange-traded FX Futures and Cleared Naira-Settled Non-Deliverable Forwards (Cleared USD/NGN NDFs) markets.

Also within the period, the average Nigerian Autonomous Foreign Exchange Fixing (NAFEX) was $/N1,610.56, compared to $/N1,584.4 recorded in the week ended July 26, 2024.

Meanwhile, FX liquidity conditions are expected to remain frail, mainly due to weak CBN intervention, analysts at Codros Capital have said.

According to the analysts, the elevated global interest rates and geopolitical uncertainties may keep foreign inflows subdued in the near term.

Data from FMDQ showed that total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) dropped to a five-month low last month, decreasing by 4.4 per cent Month on Month (MoM) to $1.9 billion from $2.01 billion recorded in June.

The decline was mainly due to a contraction in foreign inflows as the collections from foreign sources declined by 51.4 per cent m/m to $243.3 million from $500.2 million due to weaker collections from foreign portfolio investments to the tune of negative 58.8 per cent MoM and other corporates declining by negative 32.1 per cent despite the rebound in foreign direct investment of 1,705.9.

Codros Capital attributed the weaker foreign inflow to the frail foreign investor participation in the capital market following the renewed concerns on increased currency conversion and market risk associated with the tight FX liquidity and the volatility in the naira.

However, inflows from local sources which constitute 87.4 per cent of total transaction value increased by 11.1 per cent MoM to $1.68 billion in July, from $1.51 billion supported by larger inflows from the CBN which rose by 348.1 per cent MoM and inflow from individuals to the tune of 12.3 per cent while inflows from non-bank corporates and exporters segment recorded 6.9 per cent and 4.5 per cent declined.

It added: “Over the short term, we expect FX liquidity conditions to remain frail, mainly due to weak CBN intervention.

“In addition, we think FX liquidity concerns, the elevated global interest rates and geopolitical uncertainties may keep foreign inflows subdued in the near term.”