$4.4bn FX weekly turnover exposes vulnerability of Nigeria’s foreign exchange market, says Oye

…warns against dollarisation of the nation’s economy

The Chairman of the Alliance for Economic Research and Ethics (AERE), Dele Oye, has said that the record $4.375 billion recorded in Nigeria’s foreign exchange market within a single week has exposed the vulnerability of the country’s currency market and highlighted the need for better transparency and deeper structural reforms.

Oye, in a statement titled, “What a Record FX Week Really Reveals About Nigeria’s Market,” argued that the surge in turnover should not be mistaken for evidence of a stronger and more resilient foreign exchange market.

Oye explained that although the development demonstrated the market’s capacity to process a high volume of transactions, it did not necessarily indicate stronger liquidity, increased reserves or broader access to foreign exchange.

He said, “Nigeria’s foreign-exchange market recorded total spot and derivatives turnover of $4.375 billion in the week ended

July 24, 2026, the first weekly reading above $4 billion this year. The figure was 83.38% higher than the $2.386 billion reported in the preceding week, according to the FMDQ data reported by Nairametrics.

“The headline deserves attention. Yet it should not be read too quickly as proof that Nigeria’s FX market has become deep, stable, or broadly accessible. A market can generate unusually high turnover because it is liquid and well diversified; it can also generate it because a few large participants suddenly need to buy, sell, settle, or hedge dollars. Available evidence points to the need for caution before choosing between those interpretations.”

According to him, unusually high turnover could reflect a temporary increase in activity triggered by a few large transactions rather than sustained improvements in market fundamentals.

He noted that the value of forward contracts rose by more than 333 per cent during the period, increasing from $14.5 million to $62.87 million, which he said pointed to growing concerns among market participants over future exchange rate movements.

“The latest figure followed a volatile run of weekly outcomes. Turnover reached $3.053 billion in the week ended July 3, fell to $1.631 billion the next week, recovered to $2.386 billion, and then rose to $4.375 billion [1]. The sharp movement is a reminder that velocity and resilience are not the same thing. A large amount of foreign exchange may be changing hands without creating a market that is sufficiently broad, predictable, or shock-absorbing for manufacturers, small businesses, households, and long-term investors.

“The most telling detail is the parallel rise in forward contracts. Forwards increased by 333.59%, from $14.50 million to $62.87 million. Their absolute size remains modest, just 1.44% of total turnover, but their direction matters.

“When spot-market activity and forward hedging rise together, it is consistent with participants seeking both immediate dollars and protection against a future change in the exchange rate. This does not identify the buyers or prove their motive. It does, however, underline that the record week contained more than routine commercial flow.”

Oye also warned against the increasing tendency of businesses to adopt dollar pricing for domestic transactions, stressing that such a development could weaken the naira and expose consumers and smaller businesses to additional financial risks.

Referring to Dangote Refinery’s temporary decision to sell petrol, diesel and aviation fuel in dollars, he said the development illustrated how the decisions of a few large corporations could significantly influence the foreign exchange market.

“Nairametrics reported that market participants linked the exceptional week, in part, to Dangote Petroleum Refinery’s temporary shift to dollar pricing for petrol, diesel, and aviation fuel. The refinery announced the change on July 14 and later reversed it after about a week. The timing makes a contribution to the turnover surge plausible. It does not establish a full causal explanation, and the public data do not disclose enough about counterparties or transaction purposes to quantify the effect with confidence.

“That distinction is important. The responsible conclusion is not that one firm “caused” the entire $1.989 billion week-on-week increase. 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. A genuinely deep market should be able to absorb such events with less uncertainty and fewer rumours.

“The policy implication is equally clear. Nigeria must resist domestic dollarisation. The naira must remain the normal currency for domestic pricing and settlement, particularly in essential sectors. If domestic producers increasingly price local goods in dollars, the country weakens the naira’s role as a unit of account and medium of exchange while transferring currency risk to households and smaller businesses. The refinery’s reversal may have eased immediate concern, but the underlying institutional question remains unresolved.”

He emphasised that the naira must remain the principal currency for domestic trade and commercial activities, particularly in strategic sectors of the economy.

Oye further urged the Central Bank of Nigeria (CBN) and FMDQ to provide more detailed information about large foreign exchange transactions, saying greater transparency would help reduce speculation and strengthen confidence in the market.

He also called on the government to place greater emphasis on attracting long-term investments into sectors such as agriculture, manufacturing, technology and infrastructure rather than relying heavily on short-term portfolio investments.

According to him, the ultimate measure of a strong foreign exchange market is not the size of a single week’s transactions but the market’s ability to absorb shocks, support productive activities and maintain stability over the long term.

He added, “Nigeria should not dismiss the $4.375 billion week. It is useful evidence that its market infrastructure can process large volumes. But it should also reject easy celebrations. The test of a mature FX market is not whether it can produce one historic weekly number. The test is whether it can provide transparent price discovery, credible hedging, and stable access for productive users, and sufficient depth to absorb large shocks without transferring the cost to the real economy.”