Market News
FX market turnover slumps 29% as spot trading activity weakens - THE SUN
By Chinwendu Obienyi
Nigeria’s foreign-exchange market recorded a sharp slowdown in trading activity in the week ended December 22, with total turnover falling almost a third as liquidity conditions tightened toward the year-end.
Data from FMDQ Securities Exchange show that combined turnover in the FX spot and derivatives segments dropped by 29.03 per cent week-on-week (w/w) to $1.34 billion, from $1.89 billion in the previous week.
Market participants say the slowdown reflects year-end liquidity management by corporates and financial institutions, many of which have already closed their books and are delaying large FX positions until the new year. Trading desks also scaled back activity ahead of the Christmas holidays, when staffing levels are typically thin and risk appetite wanes.
The FX market is usually quieter in the final weeks of December, but the scale of the decline this year suggests that dollar availability remains a major constraint. Most banks are simply matching essential demand rather than taking proprietary positions”, traders told Daily Sun.
Analysts note that the disappearance of derivatives trades underscores lingering uncertainty about the currency outlook. FX forwards, which are typically used by importers and offshore investors to hedge currency risk, have been thinly traded since the middle of the year as counterparties struggle to agree pricing benchmarks in a volatile market.
“Derivatives activity is a good proxy for confidence. When corporates and investors stop hedging, it usually means they are unsure about where the currency is headed, or they simply cannot access enough dollars to justify forward cover”, they said.
While some rebound is expected in January as businesses reopen and pent-up demand returns, traders caution that volumes are unlikely to recover meaningfully without a material improvement in dollar supply. For now, the sharp week-on-week fall in spot market activity serves as another reminder of the fragility of Nigeria’s FX liquidity as the year draws to a close.
