ABUJA, NIGERIA — Nigeria’s official foreign exchange market recorded a sharp decline in liquidity during August 2026, with total turnover dropping by 21.2 per cent to $2.41 billion from $3.06 billion in July, driven by seasonal factors and reduced offshore investor activity.
According to data from FMDQ Securities Exchange, total FX spot and derivatives transactions in August stood at $2.41 billion, with the Nigerian Autonomous Foreign Exchange Market accounting for $1.45 billion and the Investors’ and Exporters’ window contributing $956.74 million. The average daily turnover for the month was approximately $115 million.
The decline reversed a pattern of steady recovery that had seen turnover rise from $2.49 billion in May to $3.06 billion in July. The drop in August was primarily attributed to reduced offshore investor activity and lower trading volumes during the peak of the summer holiday season. The slow release of funds from the central bank also contributed to the activity decline.
Currency Performance
The naira depreciated by 4.92 per cent in the official market during August, closing at N1,550 per dollar compared with N1,477.13 in July. In the parallel market, the naira weakened from N1,535 to N1,610 per dollar over the same period.
The disparity between the official and parallel market rates narrowed in August, reflecting improved transparency in the official market following the introduction of the Electronic Foreign Exchange Matching System. The central bank’s reform efforts continue to enhance market transparency, though the narrowing gap indicates progress in aligning the two segments.
Reserves and Outlook
Nigeria’s external reserves stood at approximately $35.2 billion at the end of August. The central bank has attributed the relative stability in reserves to reforms aimed at attracting diaspora remittances through formal channels, with July remittances reaching a record $947 million.
For September, economists expect a modest recovery in FX turnover as offshore investors take fresh positions following the release of new economic data and the conclusion of the summer holiday season. However, the CBN has cautioned that sustaining liquidity improvements will require continued market confidence and stable policy implementation.
The Nigerian FX market faces the challenge of deepening liquidity amid reduced foreign investor interest. The introduction of the electronic matching system has improved transparency and reduced the disparity between official and parallel market rates, but the market remains vulnerable to external shocks and reduced offshore investor participation. The central bank has emphasised that sustaining market liquidity will require continued reforms and improved macroeconomic stability.
As the September Monetary Policy Committee meeting approaches, market participants will be watching closely for signals on monetary policy direction. The CBN has stressed that its priority is to reduce inflation, support the naira, and maintain stability in the FX market. The trajectory of the naira in the coming months will depend on a combination of oil prices, remittance inflows, and CBN policy actions. Foreign investors are expected to monitor fiscal developments and policy consistency.
For now, the August decline in FX turnover and naira depreciation highlight the persistent vulnerabilities in Nigeria’s FX market. As the central bank continues its reform efforts, the focus will be on sustaining the improvements in liquidity and narrowing the gap between official and parallel market rates. The coming months will be critical in determining whether the FX market can maintain momentum in turnover and support the naira’s value.
