FX turnover crashes by 42.92% on first trading day in June

Source: Nairametrics
Author: Sami Tunji

The Nigerian official foreign exchange (FX) market witnessed a significant downturn in turnover, crashing by 42.92% on Monday, June 3, 2024.

It appears that traders and financial institutions took a cautious approach on the first trading day of the week and month. This cautious approach likely resulted in lower trading volumes as participants took time to evaluate market conditions before making significant moves.

This crash also coincides with the onset of a nationwide strike led by labour unions, likely suggesting the impact of industrial actions on the cautious approach taken by market participants.

According to data from FMDQ, FX turnover dropped from $213.52 million to $121.87 million, marking a sharp decline of 42.92%. This is the lowest FX turnover value in two weeks.

The drastic reduction underscores the reduced activity and liquidity in the market, reflecting the uncertainty and apprehension among market participants amid the ongoing strike.

The naira experienced mixed fortunes against the US dollar during this period.

On Monday, the naira appreciated by 0.67%, closing at N1,476.12/$1, from N1,485.99/$1 recorded as the closing rate on Friday.

The naira struggled with high volatility in the previous month, losing about 5.6% of its value in May.

This was despite the effort of the Central Bank of Nigeria (CBN) to intervene in the market, selling more foreign exchange, which likely triggered a marginal three-day decline of about $65 million in Nigeria's external reserves.

As the CBN sold more dollars on the official market, Nigeria's foreign exchange reserves dropped briefly from $32.743 billion on May 23, 2024, to $32.678 billion on May 28, 2024.