The Central Bank of Nigeria (CBN) has announced operational changes to the foreign exchange market. In a statement issued by the CBN’s Director of Financial Markets, Angela Sere-Ejembi, it was confirmed that segmentation in the market has been abolished, and all segments are now consolidated into the Investors and Exporters (I&E) window.
This move comes after the CBN directed commercial banks to eliminate the cap on the naira at the investors’ and exporters’ window. The objective behind these changes is to streamline and simplify the foreign exchange market, making it more accessible and efficient for participants.
Under the new operational guidelines, applications for medicals, school fees, BTA/PTA, and SMEs will continue to be processed through deposit money banks. Additionally, the CBN has announced the discontinuation of the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, effective from June 30, 2023.
The CBN also detailed further changes to the foreign exchange market. The “Willing Buyer, Willing Seller” model will be reintroduced at the I&E window, with operations in this window guided by the circular on its establishment dated April 21, 2017. Furthermore, government-related transactions will be based on the weighted average rate of the preceding day’s transactions at the I&E window.
Trading limits on oversold FX positions will be proscribed, allowing the hedging of short positions with OTC futures. However, overbought positions will have a limit of zero. The CBN will reintroduce order-based two-way quotes with a bid-ask spread of A1. All transactions will be cleared by a Central Counter Party (CCP) for enhanced transparency.
To ensure transparency and seamless execution of trades, the CBN will reintroduce the Order Book. The operational hours for trades will be from 9 am to 4 pm Nigerian time.
The drastic changes in the foreign exchange market come in the wake of the suspension of Godwin Emefiele as CBN governor by President Bola Ahmed Tinubu. Tinubu, in his inaugural speech as president, pledged to unify the country’s foreign exchange market and boost investors’ confidence.
The CBN urges all market participants and the general public to adhere to the newly announced rules and guidelines. These changes are aimed at creating a more efficient and transparent foreign exchange market that will attract investment and enhance economic stability in Nigeria.
