Dele Oye: Naira Vulnerable Amid $4.4bn Week-Long FX Turnover, Alleges Dollarisation, Structural Weaknesses

• Claims Dangote’s temporary dollar pricing exposed how major firms can trigger FX shocks

• Seeks greater transparency, deeper reforms, long-term capital to strengthen market resilience

James Emejo in Abuja

Chairman, Alliance for Economic Research and Ethics (AERE), Hon. Dele Oye, has warned that the $4.4 billion Foreign Exchange (FX) turnover recorded in a single week, reveals underlying fragility of the currency market rather than proving its strength.

He said while the historic trading volume underscored the market’s ability to process large transactions, this should not be misconstrued as evidence of a deeper, more liquid or resilient FX market capable of withstanding economic shocks.

In a statement titled, “What a Record FX Week Really Reveals About Nigeria’s Market,” Oye cautioned policymakers against celebrating the milestone without addressing the structural weaknesses it exposed.

According to him, the FX market recorded $4.375 billion in combined spot and derivatives turnover in the week ended July 24, 2026—an 83.38 per cent jump from the $2.386 billion recorded in the preceding week and the first weekly turnover above $4 billion this year.

He, however, maintained that unusually high trading volumes do not automatically translate into stronger liquidity, improved reserves or wider access to foreign exchange.

According to him, “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.”

Oye noted that available evidence suggested caution before interpreting the record week as a sign of lasting improvement in market fundamentals.

He pointed to the sharp volatility in recent weekly turnover figures, which climbed to $3.053 billion in the week ended July 3, dropped to $1.631 billion the following week, recovered to $2.386 billion, before surging to $4.375 billion.

According to him, the swings illustrated that high transaction velocity should not be mistaken for market resilience.

He further highlighted a 333.59 per cent jump in forward contracts—from $14.5 million to $62.87 million—arguing that although the contracts represented just 1.44 per cent of total turnover, their sharp increase indicated growing demand by market participants to hedge against future exchange rate uncertainty.

He said, “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.”

Oye also warned against the creeping dollarisation of the economy, noting that the growing practice of pricing domestic transactions in foreign currency could undermine the Naira’s role as the country’s legal tender.

He cited the recent decision by Dangote Petroleum Refinery to temporarily price petrol, diesel and aviation fuel in dollars before reversing the policy, describing the episode as evidence of how the actions of a few dominant firms could send shockwaves through the foreign exchange market.

According to him, while available data do not prove that the refinery alone caused the surge in FX turnover, the development exposed a structural vulnerability in the market.

Oye said, “The responsible conclusion is not that one firm caused the entire 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.”

He insisted that Nigeria must resist domestic dollarisation, stressing that the Naira should remain the primary currency for pricing and settling transactions, particularly in critical sectors of the economy.

He said, “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.”

Oye further urged the Central Bank of Nigeria (CBN) and FMDQ to improve transparency by providing more detailed information on major foreign exchange transactions, arguing that greater disclosure would reduce speculation and strengthen investor confidence.

He also called on the government to shift attention from volatile portfolio inflows towards attracting long-term investments into agriculture, manufacturing, technology and infrastructure.

According to him, the true measure of a healthy FX market is not a single record-breaking trading week but its ability to absorb shocks, support productive economic activities and guarantee stable access to foreign exchange for businesses and investors.

He said, “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, stable access for productive users, and sufficient depth to absorb large shocks without transferring the cost to the real economy.”

According to him, “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.

“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.”

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.”