AERE warns FX turnover surge may hide Nigeria liquidity risks, urges transparency
AERE warned that Nigeria’s reported $4.38 billion foreign‑exchange turnover for the week ending July 3 may be masking underlying liquidity risks, noting that the spike likely stemmed from a few large trades rather than broad market depth. The think tank cautioned that high turnover does not equal a deep, stable FX market and urged the CBN and FMDQ to publish detailed, anonymised transaction data to reveal true market depth.
This matters because businesses and investors could misinterpret strong turnover figures as signs of a resilient foreign‑exchange market, leading to misplaced confidence in hedging, import budgeting or investment decisions. If liquidity is thin, sudden demand shocks could trigger sharp naira volatility, affecting import costs, inflation and foreign‑direct investment flows.
Readers should monitor forthcoming CBN/FMDQ transaction reports for signs of genuine market depth, consider using available hedging instruments to protect against exchange‑rate swings, and avoid assuming that a single high‑volume week signals lasting stability. Policymakers should deepen the hedging market and discourage domestic dollarisation to keep the naira as the primary domestic settlement currency.
Given the fragility signalled by the turnover surge, how might you adjust your foreign‑exchange exposure or hedging strategy to guard against sudden naira moves?