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This increase coincided with the Central Bank of Nigeria's announcement that foreign inflows into the nation rose to $585 million during the same month.
On Tuesday, the official market saw the naira depreciate slightly to N1,658 against the US dollar, down from N1,659 on Monday, while black market rates were reported at N1,670.
The Central Bank of Nigeria indicated that the substantial turnover in the Nigerian Autonomous Foreign Exchange Market signifies a remarkable month-on-month growth of 33.88%, translating to an additional N2.51 trillion compared to July 2024's turnover of N13.23 trillion ($7.39 billion).
This increase highlights a surge in trading activity and greater investor participation in the foreign exchange market. Key participants in the NAFEM include commercial banks, the Central Bank of Nigeria, and international oil companies.
The financial markets monthly report for August, published by FMDQ, noted that the rise in turnover was primarily driven by increased transactions in Treasury bills, Open Market Operations (OMO) Bills, and Federal Government Bonds, while other bond transactions saw a month-on-month decline of 18.43% (N10 billion).
The naira continued to depreciate despite the increase, leading to greater volatility in exchange rates.
According to the report, “Spot FX market turnover reached $9.90 billion (N15.74 trillion) in August 2024, marking a month-on-month increase of 33.88 percent ($2.51 billion) from July 2024's turnover of $7.39 billion.”
Additionally, it noted that the total secondary market turnover on the FMDQ Exchange was N40.43 trillion, reflecting a month-on-month rise of 31.97 percent (N9.79 trillion) and a year-on-year increase of 128.57 percent (N22.74 trillion) compared to figures from July 2024 and August 2023.
The FMDQ reported that transactions in the Foreign Exchange and Money Market sectors dominated secondary market activities, together accounting for 69.98 percent of the total turnover in August 2024.
In August, the naira fluctuated between N1,543.84 and N1,617.08, showing increased volatility compared to the previous month’s range of N1,500.32 to N1,621.12.
The average spot exchange rate rose by 1.68 percent (N26.24), closing at N1,586.56, up from N1,560.32 in July.
In the FX Market, the naira depreciated against the US dollar, with the spot exchange rate increasing by 1.68 percent (N26.24) to an average of N1,586.56 in August 2024, compared to N1,560.32 recorded in July 2024.
“Further, exchange rate volatility increased in August 2024 as the Naira traded within an exchange rate range of $/N1,543.84 – $/N1,617.08 compared to $/N1,500.32 – $/N1,621.12 recorded in July 2024.”
The heightened volatility highlights the difficulties the Naira is experiencing due to persistent economic pressures, such as inflation and changes in global market conditions.
Recently, the Central Bank of Nigeria conducted an auction of $876.26 million to end users via 26 commercial banks, aiming to bolster the struggling Naira. This initiative resulted in a brief appreciation of the Naira against the US Dollar, with the exchange rate shifting from N1,601 to N1,596.52 per dollar.
The auction, which sold approximately $876.26 million, was designed to ease the increasing demand in the foreign exchange market and facilitate price discovery.
The sales report indicated that the manufacturing sector saw significant advantages from the auction, obtaining dollars for the importation of spare parts, industrial raw materials, plain paper, pharmaceutical products, and brewery equipment.
On Tuesday, the official market recorded a decline in the Naira's value, dropping by N1 to N1,658 against the US dollar, down from N1,659 on Monday, while black market rates reached N1,700.
Additionally, CBN Governor Olayemi Cardoso emphasized that the Naira's value against international currencies will not improve unless the underlying issues related to foreign exchange expenses are addressed.
During a press briefing following the 297th Monetary Policy Committee meeting, he noted that Nigeria's external reserves have risen again, reaching $39.07 billion as of September 19, 2024.
He reiterated that while the apex bank's strategy aims to diversify sources within the foreign exchange sector, it is insufficient and cannot substitute for addressing fundamental issues.
He said, “The external reserve stood at US$39.07bn as at 19th September 2024 an increase of 17.4 per cent compared with US$33.28bn in the corresponding period of 2023. This represents 8 months of import cover for goods and services and 13 months of imports of goods only.”
“As of August, inflow from remittances was $585m and this is a big deal as it is 130 per cent for the corresponding period last year. These figures didn’t drop from the ceiling but our deliberate and calculated effort. We recognised that certain things were not happening. We liberalised the IMTOs and encouraged them to open accounts in naira and we are normally dealing with them regularly and this has incredibly paid off.
“But on the naira, I must tell you that since the strategy of the central bank is to unlock as many diversified sources. it is not enough and can never replace the fundamentals.”
The central bank governor elaborated that the nation’s monolithic economic structure presents an obstacle to attaining the robust exchange rate we all seek.
“Non-oil exports must also increase. Having an exchange rate that we all so desire will continue to be hampered. We need to diversify our economy to boost the naira. We may like to think or dream it can, but it can’t. Until the fundamentals are fixed and in place, you will continue to sub-optimise,”
“Oil production has got to be ramped up to the level that will carry the economy. I think we are all ongoing witnesses to the efforts that are being made in that sector. It has to happen. I spoke about the sad situation that we as Nigerians face today whereby we are a monolithic economy.
“We need to diversify our economy. There is so much that a central bank can do. Without the fundamentals in the right position, we will continue to sub- optimiser,” Cardoso added.
The Central Bank of Nigeria’s governor emphasized the importance of Nigerians finding methods to accomplish import substitution.
“It can not just be about import and we must be able to calibrate accordingly our taste for foreign goods,” Cardoso said.
“These are all things that will determine essentially where we settle in respect to our foreign exchange rate.”
The central bank has expressed its commitment to contributing to the efficient functioning of the market, while also cautioning that it is prepared to impose penalties on individuals who manipulate market conditions.