Naira depreciates against Dollar amid forex market volatility in October 2024

The naira saw continued depreciation against the dollar in October 2024 as exchange rate volatility persisted, according to the FMDQ Exchange.

The Nigerian naira experienced a significant depreciation against the US dollar in October 2024, amidst sustained volatility in the foreign exchange market, according to the latest financial report from the FMDQ Exchange.

The report, released on Thursday, highlighted that the naira’s spot exchange rate increased by 2.38%, closing at an average of N1,631.71/$, compared to N1,592.89/$ in September 2024.

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This marks a continued downward trend as the naira struggles against the dollar despite ongoing efforts by the Central Bank of Nigeria (CBN) to stabilise the currency.

The exchange rate volatility persisted throughout the month, with the naira trading within a range of N1,552.92 to N1,675.49, compared to N1,539.65 to N1,667.42 in the previous month.

The FMDQ report also revealed that the spot FX market turnover reached $10.08 billion (approximately N16.36 trillion), marking a 6.58% month-on-month increase from September 2024.

Despite the efforts of the CBN to strengthen the naira, the currency closed trading for the month at N1,675.49/$, well above the N1,600 mark.

In November 2024, the naira continued to face challenges, closing at N1,687.52/$, showing a slight daily decline of 0.51% from the previous trading figure.

The CBN’s efforts to address the forex market’s challenges have been met with mixed results.

While the Central Bank has implemented various measures, including raising the monetary policy rate by a cumulative 850 basis points to 27.25% since February 2024, these initiatives have yet to stabilise the market.

Fitch Ratings, a global rating agency, has expressed concerns over the lack of stability in Nigeria’s forex market, even as the IMF has noted signs of potential stability due to the CBN’s actions.

In the secondary market, forex and money market transactions dominated activity, accounting for 75.74% of the total turnover in October 2024.

Total secondary market turnover increased by 14.54% to N41.23 trillion, a 90.05% rise compared to the same period in 2023.

The report also highlighted an increase in turnover across the FX, Money Market, and Fixed Income sectors, with growth in Repos/Buy-backs, T-bills, OMO Bills, and FGN Bonds.

Looking ahead, the introduction of an electronic FX matching platform by the CBN in December 2024 aims to enhance transparency and provide real-time intra-day prices for all FX transactions, which may help mitigate some of the challenges in the market.

However, Fitch remains cautious, questioning whether these measures will be enough to stabilise the market in the long term.

The ongoing volatility in Nigeria’s forex market, combined with the naira’s continued depreciation, is expected to remain a key issue for the CBN and policymakers as the country navigates the challenges of stabilising its currency.