FX, govt debt drive N496.6trn financial-market turnover as real-eco

Nigeria’s financial markets recorded N496.61 trillion in cumulative turnover in the first eight months of 2026, but the composition of the activity is exposing a growing dependence on foreign exchange trading and government securities rather than instruments that directly finance businesses and productive investment.

The turnover, recorded on the FMDQ Exchange between January and August, increased by N70.10 trillion, or 16.43 per cent, from N426.51 trillion at the end of July. At the current pace, activity has already reached about 73 per cent of the N676.71 trillion recorded during the whole of 2025.

The concentration of activity is striking. Government securities accounted for N230.27 trillion, or 46.4 per cent of total turnover, while foreign exchange transactions generated another N192.32 trillion, or 38.73 per cent.

Together, the two markets accounted for about 85 per cent of all FMDQ activity during the eight months, underscoring the dominance of sovereign borrowing, liquidity management and currency trading in Nigeria’s financial system.

Open Market Operation (OMO) bills alone generated N146.93 trillion in turnover, making them the second-largest individual product after spot foreign exchange, which recorded N171.43 trillion.

FGN bonds generated N42.08 trillion, while Treasury Bills accounted for N41.26 trillion. Repurchase agreements added another N69.99 trillion as banks and other financial institutions actively managed short-term liquidity.

The figures point to a financial market that is highly liquid and increasingly active, but they also raise questions about where that liquidity is ultimately being deployed.

Commercial papers, other bonds, money-market derivatives and several other private-sector instruments recorded no turnover on FMDQ during the period, according to the Exchange’s data.

For the Federal Government, the heavy activity in sovereign securities provides a deep domestic market through which it can finance deficits and manage its cash requirements. For banks and institutional investors, government securities offer liquid instruments with attractive yields and comparatively lower credit risk.

But the same pattern can create a difficult financing environment for businesses that need longer-term capital to expand production, purchase machinery, build warehouses or finance working capital.

FMDQ said the market recorded average daily turnover of N3.07 trillion across 162 business days in the January-August period, equivalent to about $2.23 billion a day at the Exchange’s average exchange rate.

The market is also highly concentrated among major banks. The top 10 dealing-member banks accounted for 75.94 per cent of turnover between January and July, while the top three controlled more than half of the turnover generated by the top 10.

The surge in activity coincides with a structural improvement in foreign exchange inflows. The Central Bank of Nigeria reported $31.34 billion in total FX inflows in the first quarter, with autonomous sources accounting for $21.15 billion, or 67.5 per cent of the total. These included oil exports, remittances, non-oil exports and portfolio investment.

Portfolio investment inflows alone reached $6.03 billion in Q1, up 14.4 per cent, showing renewed foreign appetite for Nigerian financial assets.

The challenge for policymakers is therefore moving from financial-market activity to economic transmission. N496.61 trillion in turnover demonstrates substantial liquidity and trading capacity, but turnover is not the same as fresh investment.

The real test is whether the expanding financial market can channel a larger share of that liquidity into manufacturers, exporters, infrastructure projects, small businesses and other productive sectors capable of creating jobs, expanding output and generating sustainable foreign exchange.

Until that happens, Nigeria risks having an increasingly busy financial market without a corresponding expansion in the productive economy it is supposed to finance.