The naira lost ground against the dollar this week as trading activity on the official forex market dried up sharply, with turnover collapsing by nearly half.
Data from the Nigerian Foreign Exchange Market (NFEM) showed that the volume of dollars traded fell dramatically compared with the previous week. Fewer transactions meant less liquidity in the market, a situation that typically puts pressure on the local currency.
Traders attributed the sharp drop in activity to a combination of factors. The school holidays have kept some participants away from their desks. Bank balance sheet management ahead of month-end also played a role, with institutions pulling back from aggressive trading. Uncertainty about US policy under the new administration in Washington added to caution in the market.
The weaker naira reflects the reality facing Nigeria's forex market. Without steady inflows of dollars from oil sales or foreign investment, the currency struggles. The central bank has worked to stabilise the market through various interventions, but the underlying supply-demand imbalance persists.
Market analysts say the situation should normalise once holiday periods end and economic activity picks up. They expect turnover to recover as banks and businesses resume normal operations. The outlook depends heavily on whether dollar inflows improve in the coming weeks, particularly from petroleum revenues and foreign portfolio investments.
