Nigeria’s Forex Market Trading Hits $500 Million Daily as Reforms Boost Liquidity

Nigeria is seeing daily trading value of $500 million in the Nigerian Foreign Exchange Market (NFEM) a signal of significant return of liquidity and investor confidence.

The increase in liquidity is a direct consequence of the Central Bank of Nigeria (CBN) implementing far-reaching reforms, primarily focusing on restoring a market-driven, “willing buyer, willing seller” environment.

“What we are seeing in today’s foreign exchange (FX) market hasn’t happened before, where you have willing buyers and sellers, and an open and transparent system,” CBN Governor Olayemi Cardoso told a press conference in Abuja.

“Today we see $500M a day in turnover, with CBN not being a participant in many days. Now everyone plays in accordance with the rules which helps to bring stability in our FX market.

The low liquidity of the past was the primary driver of volatility and the wide gap between the official and parallel exchange rates.

The naira trades at a less than 2% differential between the official and parallel market a convergence that has been positive for stability. It was as high as 60% two years ago when Cardoso took office.

The naira weakened by 0.99 per cent at the official Nigerian Foreign Exchange Market to 1,456.72/$ as of Friday, from 1,442.43/$ in the previous week. At the parallel market, the currency traded weaker within the range of 1,470/$ and 1,475/$.

“Nobody is making money at the expense of others. it is a far more disciplined market, with policy consistency and every participant knows where things are going and they can plan,” Cardoso said.

Key Reforms Driving the Liquidity

The sustained increase in trading value is linked to several structural and policy actions taken by the current CBN administration:

• Rate Unification: The major reform was the collapse of multiple exchange rate windows into the single Nigerian Foreign Exchange Market (NFEM), adopting a market-determined ‘willing buyer, willing seller’ model. This eliminated arbitrage opportunities that discouraged legitimate trades.

• Backlog Clearance: The CBN successfully cleared a substantial portion of the verified Forex backlog, fulfilling old obligations and restoring trust with foreign investors and airlines.

• Electronic Trading System: The introduction of the Electronic Foreign Exchange Matching System (EFEMS), often using the Bloomberg BMatch platform, has increased transparency and reduced counterparty risk in interbank trading.

• Non-Resident BVN: Allowing Non-Resident Nigerians to obtain a Bank Verification Number (BVN) has eased the process for the diaspora to remit funds through formal channels, boosting supply.

• BDC Oversight: The tightening of regulations and the subsequent revocation of licenses for many non-compliant Bureau De Change (BDC) operators have tightened the regulatory control over the retail segment.

FX trading value still at about 50% of levels seen 18 years ago

That being said, when the FX net open position of Nigerian banks was at 20% of shareholders’ funds in 2008, daily FX turnover in Nigeria was as high as USD 1bn.

FX turnover then fell to around USD 300-500 million a day when the foreign exchange trading position was 1% of shareholders’ funds.

It then collapsed to around USD 60 million in 2016 during ex CBN Governor Emefiele’s time in office.

These FX liquidity figures for Nigeria compare to South Africa’s spot foreign exchange (FX) market daily trading value estimates of around $4 billion to $6 billion per day.

Nigerians happy to hold naira

Cardoso said the CBN was building up its dollar reserves in a systemic manner which is also helping to make for a more functional FX market.

Gross CBN dollar reserves recently hit multi-year highs of $44.45 billion as at November 21, 2025, equivalent to 10-months of import cover.

Nigerians are very happy to hold the Naira today, Cardoso said.

“When u travel overseas now you can pay with your Naira card or dollar debit card. The fear that used to permeate that market is in the past,” Cardoso said.

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