Nigeria’s foreign exchange market recorded its highest weekly turnover this year; however, a new analysis has warned that the milestone may reflect temporary, large transactions rather than lasting improvements in market liquidity and stability.
According to an editorial released by the Alliance for Economic Research and Ethics, total spot and derivatives turnover reached $4.375 billion in the week ended July 24, 2026, an 83.38 per cent increase from $2.386 billion recorded a week earlier.
The report noted that while the figure marked the first weekly turnover above $4 billion this year, it should not be interpreted as evidence that Nigeria’s foreign exchange market has become deeper or more resilient.
“The $4.375 billion recorded in a single week is important, but turnover is a measure of trading activity—not a verdict on market depth, reserve strength, or broad-based access to foreign exchange.
“The quality, composition, and transparency of the flow matter as much as the headline number,” the Alliance stated.
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It observed that spot transactions accounted for $4.312 billion, or 98.56 per cent of total turnover, while forward contracts rose sharply by 333.59 per cent to $62.87 million.
Although forward transactions remained a small share of the market, the increase suggested that participants were seeking both immediate access to foreign exchange and protection against future exchange rate movements.
It also highlighted significant volatility in recent weeks, with turnover rising to $3.053 billion in the week ended July 3 before falling to $1.631 billion, recovering to $2.386 billion and then surging to the latest record level.
The Alliance argued that high trading volumes alone do not necessarily indicate a market that is broad, predictable or capable of absorbing shocks.
Regarding the possible drivers of the surge, the Alliance cited market reports linking the increase partly to Dangote Petroleum Refinery’s temporary decision to price petrol, diesel, and aviation fuel in US dollars, which it reversed about a week later.
However, it stressed that available public data do not prove that the refinery alone was responsible for the sharp increase in turnover.
“The responsible conclusion is not that one firm ’caused’ the entire $1.989 billion week-on-week increase,” the Alliance said. “It is that the episode demonstrates a structural exposure: when a major domestic firm changes its pricing or procurement behaviour, the FX market can face an abrupt and unusually large demand shock.”
The Alliance warned against increasing dollarisation of domestic transactions, saying the naira should remain the primary currency for pricing and settlement within Nigeria, particularly in essential sectors.
It argued that pricing local goods in foreign currency shifts exchange rate risk to households and businesses while weakening the role of the naira in the economy.
It further noted that although high domestic interest rates may attract foreign portfolio investment and support short-term liquidity, such inflows should not be mistaken for long-term investment that strengthens the economy.
The Alliance, however, urged policymakers to focus on attracting foreign direct investment, boosting non-oil exports and supporting investment in infrastructure, technology, manufacturing and agro-processing to create more sustainable sources of foreign exchange.
It also called for greater transparency in the foreign exchange market, recommending that the Central Bank of Nigeria and FMDQ publish anonymised data showing the broad purpose of weekly foreign exchange transactions, including trade-related demand, portfolio flows, debt service and corporate settlements.
According to the report, improved disclosure would reduce speculation, strengthen price discovery and help investors better assess market conditions.
The Alliance also urged authorities to develop a stronger hedging market, enforce the use of the naira for domestic transactions and encourage policies that increase long-term foreign exchange supply through productive investment rather than relying on short-term capital inflows or isolated large deals.
“The test of a mature FX market is not whether it can produce one historic weekly number,” it added. “The test is whether it can provide transparent price discovery, credible hedging, stable access for productive users, and sufficient depth to absorb large shocks without transferring the cost to the real economy.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X