Nigeria’s once-illiquid foreign exchange market is fast turning the corner, with liquidity climbing to pre-COVID levels in relief for the embattled naira.
Turnover in the official market surged to a record $6.4 billion in February before cooling to $4.3 billion in March. Deals are off to a blistering start in April with over $1 billion traded on the first trading day of the month, the highest in a single day since 2017.
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That’s up 27 percent from $857.78 million traded last Thursday (the final trading day before a two-day easter break) and is almost five times the average daily transactions in the market since the start of the year.
The improved liquidity helped the naira extend its week-long winning streak, as the currency hit a three-month high of N1278 per US dollar on Tuesday compared to N1309 last Thursday.
Dollar inflows into Nigeria have surged since the CBN lured foreign portfolio investors with higher interest rates on government debt and an undervalued naira. The moves were complemented by clearing a protracted foreign exchange forwards backlog that had drained confidence in past reforms.
Cumulative foreign inflows since the beginning of the year were estimated by the CBN at $2.1 billion compared to $1.6 billion in the whole of 2023.
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That has led to an accretion in foreign exchange reserves which the CBN forecast will hit $35 billion by the end of this month.
