Nigeria’s foreign exchange market recorded a significant increase in trading activity during the latest trading week, with total market turnover climbing to approximately $2.84 billion, even as the naira continued to weaken against the United States dollar.
The higher trading volume reflects growing activity across the country’s foreign exchange market, driven by increased demand from importers, manufacturers, financial institutions and other corporate entities seeking access to foreign currency. While stronger turnover is often viewed as a positive indicator of market liquidity, it was not enough to shield the local currency from continued depreciation as demand for dollars remained elevated.
Market data showed that total turnover rose by more than 20 percent compared to the previous trading week, with the spot market accounting for the largest share of transactions. Activity in the derivatives segment also strengthened, suggesting that more businesses are adopting hedging strategies to manage the risks associated with exchange rate volatility.
The latest performance highlights the evolving nature of Nigeria’s foreign exchange market, where reforms introduced over the past two years have encouraged greater transparency and improved participation by market players. Although exchange rates continue to fluctuate, analysts say deeper liquidity is helping businesses access foreign exchange through official channels more efficiently than in previous years.
Despite the increase in market activity, the naira remained under pressure throughout the week as demand for foreign currency continued to outpace available supply. Import-dependent businesses, manufacturers sourcing raw materials from overseas and companies with foreign currency obligations remained among the biggest buyers of dollars, contributing to sustained pressure on the domestic currency.
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Financial analysts noted that a rise in market turnover should not automatically be interpreted as a sign of currency appreciation. Instead, it often reflects increased buying and selling activity within the market. When demand for foreign exchange exceeds supply, the exchange rate can continue to weaken even as transaction volumes rise.
“The increase in turnover is an indication that liquidity in the market is improving,” a Lagos-based financial analyst said. “However, exchange rate stability depends on achieving a better balance between foreign exchange demand and available inflows. Higher trading volumes alone cannot strengthen the naira if demand continues to dominate.”
Recent monetary reforms aimed at liberalising the foreign exchange market have contributed to higher transaction volumes by allowing market forces to play a greater role in determining exchange rates. The changes have also improved confidence among investors and financial institutions, many of whom had previously faced challenges accessing foreign currency through official channels.
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The continued participation of banks, institutional investors and corporate organisations has supported the expansion of market activity, while improved price discovery has made the market more transparent than in previous years. Analysts believe these developments are gradually restoring confidence in Nigeria’s foreign exchange system, although they acknowledge that significant challenges remain.
Another factor influencing the market is the growing demand for foreign exchange to finance imports, service external obligations and facilitate international business transactions. As Africa’s largest economy continues to rely heavily on imported machinery, industrial equipment, pharmaceuticals and refined petroleum products, demand for dollars remains consistently high.
At the same time, authorities continue to pursue policies aimed at increasing foreign currency inflows through higher oil production, improved non-oil exports and stronger investor confidence. These measures are expected to support liquidity over the medium term, although economists say broader structural reforms will be necessary to achieve lasting exchange rate stability.
Market participants also point to Nigeria’s improving external reserves and renewed interest from foreign portfolio investors as positive developments capable of supporting the foreign exchange market. Increased capital inflows could help ease pressure on the naira if sustained over an extended period.
Businesses are nevertheless expected to remain cautious as exchange rate movements continue to influence production costs, import prices and overall operating expenses. Companies with significant exposure to foreign currencies are increasingly adopting hedging strategies and strengthening their treasury operations to manage ongoing volatility.
Looking ahead, analysts expect foreign exchange trading volumes to remain strong as economic activity gathers pace and businesses continue to source foreign currency for commercial operations. The direction of the naira, however, will largely depend on the pace of foreign exchange inflows, global market conditions, oil export earnings and the effectiveness of ongoing monetary and fiscal policies.
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Although the weaker naira remains a concern for businesses and consumers, the rise in foreign exchange turnover signals that Nigeria’s FX market is becoming more active and liquid. Sustaining that momentum while narrowing the gap between demand and supply will be crucial to improving currency stability, supporting investor confidence and strengthening the country’s broader economic outlook in the months ahead.
