The Central Bank of Nigeria (CBN) has announced the unification of all segments of the forex exchange (FX) market.
This was part of a series of immediate changes to operations in the FX Market, in a bid to improve liquidity and stability.
According to a press release signed by the Director of Financial Markets, Angela Sere-Ejembi, PhD, and dated 14 June 2023, the changes include:
CBN Confirms Changes To FX Market, Forces To Decide Exchange Rates
- Abolishing the segmentation of the FX market into different windows. All transactions will now be done through the Investors and Exporters (I&E) window, where the exchange rate will be determined by market forces. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.
- Reintroducing the “Willing Buyer, Willing Seller” model at the I&E window, where all eligible transactions can access foreign exchange at their preferred rates.
- Setting the operational rate for all government-related transactions at the weighted average rate of the previous day’s executed transactions at the I&E window, rounded to two decimal places.
- Prohibiting trading limits on oversold FX positions and allowing hedging of short positions with OTC futures. Limits on overbought positions will be zero.
- Reintroducing order-based two-way quotes, with a bid-ask spread of N1. All transactions will be cleared by a Central Counter Party (CCP).
- Reintroducing an Order Book to ensure transparency of orders and seamless execution of trades.
- The CBN also announced the cessation of two schemes that were introduced to boost remittances and forex supply: the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, effective from 30 June 2023.
With the emergence of market forces as the major determinants of exchange rates the currency price will tow a floating exchange rate model.