The Central Bank of Nigeria (CBN) has unveiled new guidelines for foreign exchange (FX) trading through its Electronic Foreign Exchange Matching System (EFEMS), effective November 25, 2024. The move aims to enhance transparency, efficiency, and regulatory compliance in Nigeria’s foreign exchange market.
The updated regulations were announced by Dr. Omolara Duke, Director of the CBN’s Financial Markets Department, and include several key changes to streamline the process for interbank FX transactions.
Key Highlights of the New Guidelines:
- Trading Requirements: The CBN has introduced a minimum trade size of $100,000 for interbank FX transactions, with subsequent trades required to be at least $50,000. This new policy is designed to standardize trade volumes and mitigate financial risks in the market.
- Trading Platform and Hours: Bloomberg’s BMatch platform will serve as the official platform for FX transactions under the new system. Trading will be available from 9:00 AM to 4:00 PM West Africa Time on business days. Initially, the system will only support transactions between the Nigerian naira and the US dollar, although the CBN has indicated that other currency pairs may be incorporated in the future.
- Participation Rules: Only authorised dealer banks licensed by the CBN will be allowed to participate in FX trading. These banks are required to sign agreements with the platform provider, maintain up-to-date profiles, and adhere to specified credit and settlement limits.
- Trading Principles: All trades conducted through the system will be binding unless mutually cancelled with CBN approval. Transactions will remain anonymous until matched, and participants must report any trades exceeding the prescribed limits. Additionally, any bank wishing to withdraw from the platform must provide a 30-day notice.
The Bloomberg BMatch system, which will facilitate these new guidelines, is set to launch on December 2, 2024. The CBN has warned that non-compliance with the new regulations could result in substantial penalties, including the publication of trade data, ensuring that participants adhere to the rules.
The CBN’s primary goal is to improve market efficiency, enhance transparency in FX transactions, and provide better oversight to the foreign exchange market in Nigeria, as it works towards stabilizing the currency and promoting investor confidence.