Naira Closes Week at N1,331.20 as FX Turnover Drops 30.23% to $2.37bn

The naira closed last week at N1,331.20 per dollar, a 0.35% decline from its Monday opening rate of N1,326.51, as activity in Nigeria's foreign exchange market fell sharply. Total turnover dropped 30.23% to $2.37 billion in the seven days to 18 September, down from $3.39 billion in the week ended 11 September, FMDQ Group data showed.

The slide represents a decline of about $1.03 billion week-on-week, with both spot and derivatives transactions losing ground. Derivatives recorded the sharper contraction.

Derivatives trading collapses 93.74%

FX derivatives turnover fell 93.74% to $26.78 million from $427.99 million the previous week. All derivatives transactions during the week were FX forwards.

Spot market turnover declined 21.06% to $2.34 billion from $2.96 billion a week earlier. Spot deals accounted for 98.87% of total turnover, while derivatives represented just 1.13%.

FMDQ Group Chief Operating Officer Tumi Sekoni attributed the weekly decline to the 21.06% fall in FX spot transactions and the 93.74% drop in derivatives trading.

Average daily FX turnover dropped to $473.26 million from $678.33 million in the previous week, pointing to weaker trading across the market.

Naira weakens by N4.77 before Friday recovery

The naira lost N4.77 between Monday and Thursday before recovering marginally by N0.08 on Friday. The dollar traded between N1,329.50 and N1,334.50 during Friday's session.

Trading picked up on the final day of the week. Interbank turnover rose to $162.67 million from $84.22 million on Thursday, while the number of deals increased to 127 from 104 a day earlier. Friday's turnover was the highest since Tuesday, when interbank trading reached $262.12 million.

In the parallel market, the dollar traded at N1,390, leaving a gap of about 4.1% between the parallel-market rate and the official closing rate.

Reserves rise as analysts see stability

Analysts at Cowry Assets Management said sustained demand for the US dollar pressured the naira as investors reassessed returns on dollar-denominated assets following recent interest-rate decisions by the US Federal Reserve and the Bank of Japan. They said portfolio adjustments added pressure but noted the relatively limited movement suggested the currency remained broadly stable despite increased demand.

Nigeria's external reserves rose 0.33% week-on-week to $54.67 billion, extending recent improvement in the country's foreign exchange buffer. Analysts said the higher reserves could support FX market liquidity and the Central Bank of Nigeria's capacity to meet legitimate dollar demand.

Cordros Research expects the naira to remain broadly stable in the near term, supported by portfolio inflows, relatively firm investor sentiment and a widening current account surplus.

For Nigerian businesses, the 4.1% gap between official and parallel rates keeps import costing uneven, while the weaker daily turnover signals thinner liquidity for firms sourcing dollars for letters of credit and other obligations.