Nigeria’s FX reserves gain $535 million in 28 days as official market struggles with scarce dollars 

The latest data from the Central Bank of Nigeria (CBN) reveals a steady upward trend in the reserves, showcasing the country’s resilience in maintaining its financial stability amidst challenging economic conditions. 

The CBN reported that the FX reserves rose from $32.107 billion on April 19, 2024, to $32.642 billion by May 16, 2024. This growth represents a substantial boost for the country’s external reserves, which play a crucial role in stabilizing the naira and supporting the economy. 

The official forex market experienced a significant drop in turnover between Thursday, May 16 and Friday, May 17, 2024, recording a steep 69.4% decline. 

On Thursday, the forex turnover stood at $272.86 million, indicating a robust trading day with substantial market activity. However, this figure drastically fell to $83.5 million on Friday, highlighting a stark contrast in the volume of transactions within just a 24-hour period. This was the lowest turnover rate since January 20, 2024. 

This sharp decline in forex turnover underscores the volatility and unpredictability that currently characterize the FX market. 

On Thursday, the turnover had fallen marginally by 5.63% to $272.86 million. This squeeze in forex liquidity likely contributed to the naira’s sharp decline in value on the official market on that day. 

The exchange rate between the naira and dollar closed at N1,497/$1 on Friday, May 17, 2024. It was a 2.5% gain from the N1,593.9/$1 recorded a day earlier, which was the weakest since March 20 this year. 

The exchange rate between the naira and dollar in the official NAFEM Window depreciated to N1,533.99/$1 on Thursday, May 16, 2024. This was a 4.89% drop in one day. 

The trading dynamics on Friday further affirmed the erratic nature of the market. During intra-day trading, the exchange rate peaked at an intra-day high of N1,555/$1, highlighting a temporary surge in dollar sales. 

Conversely, the intra-day low was N1,415/$1, reflecting periods of heightened buying pressure on the naira.  

The sharp movements within a single trading day suggest heightened uncertainty and instability, making it challenging for businesses and investors to plan their financial activities.