Nigeria’s foreign exchange market recorded a sharp rebound in trading activity in the week ended 9 October, with dollar transactions climbing to $3.37 billion from $1.70bn a week earlier, as spot deals accounted for almost all the increase.
Data from FMDQ showed that turnover rose by $1.67bn, representing a 98.58 per cent increase from the previous week ended 2 October.
The recovery followed a 35.41 per cent decline in the preceding week, when total transactions dropped to $1.70bn.
Spot transactions drove the recovery, rising by 98.37 per cent to $3.24bn from $1.63bn in the previous week.
The increase of approximately $1.61bn accounted for nearly all the growth in overall turnover, with spot deals representing 96.08 per cent of transactions during the reporting period.
Spot transactions involve the purchase and sale of foreign currencies for near-immediate delivery. Banks, importers, exporters and other market participants use them to meet payment obligations and settle foreign currency requirements.
For Nigerian manufacturers and other businesses dependent on imported inputs, access to dollars through the spot market affects the cost of purchasing raw materials, machinery and other goods from overseas.
The average daily value of transactions increased to $673.97m from $424.24m in the preceding week, according to the data.
Trading in FX forwards also strengthened, although it remained a small part of the market.
Forward transactions rose by 103.85 per cent to $131.95m from $64.73m, an increase of about $67.22m.
These contracts allow buyers and sellers to agree on an exchange rate for a future transaction, helping businesses manage uncertainty over the naira cost of payments due later.
Despite the increase, forward transactions accounted for only 3.92 per cent of total FX turnover in the week, leaving spot deals firmly dominant.
The latest figures bring weekly FX turnover close to the $3.39 billion recorded in the week ended 11 September.
Trading subsequently weakened, falling to about $1.70bn in the week ended 2 October before recovering almost completely in the latest reporting period.
The swings highlight the uneven pattern of activity in Nigeria’s formal foreign exchange market over recent weeks.
In its weekly economic and market report for the week ended 9 October, Cordros Securities said the near-term outlook for foreign exchange inflows would depend on the resilience of foreign portfolio participation and a recovery in domestic sources of dollar supply.