A Central Bank of Nigeria (CBN) statement revealed between September 6 and September 30, 2024, it sold US$543.5 million to domestic deposit money banks (DMBs) that were licensed dealers.
Omolara Duke, the Director of the CBN’s Financial Markets Department, said in a statement that the transaction, which used a two-way quote, occurred at the Nigeria Foreign Exchange Market (NFEM) over eleven dealing days. She explained that the purpose of the spot sales was to lessen the volatility of the market, which was caused by strong demand for foreign exchange and commodities imports.
The value date, according to her, was T+2, or the settlement dates of security transactions that take place on a transaction date plus an additional two days.
She had this to say: “This statement is to educate and provide guidance to the general public regarding the pricing of fx.
“This is by taking a clue from the range of rates at which fx was sold by the CBN to authorised Dealers.
“The CBN will continue to facilitate the supply of fx into the NFEM as part of its holistic fx management strategy,” she added.
For Foreign Exchange (FX) transactions under NFEM, the CBN had previously announced the launch of an Electronic Foreign Exchange Matching System (EFEMS).
Continuing, she added that the new approach is anticipated to improve transparency and governance and provide a publicly available market-driven exchange rate.
According to Duke: “This development is expected to reduce speculative activities, eliminate market distortions, and give the CBN improved oversight capabilities to effectively regulate the market.
“Authorised dealers will subsequently conduct all foreign exchange transactions in the interbank Fx market on the EFEMS approved by the CBN where transactions will be reflected immediately,” she added.
She went on to say that CBN would release real-time prices as soon as the EFEMS is online and that there will be a two-week test run in November. She added that the CBN will publish the EFEMS guidelines in association with the Financial Markets Dealers Association (FMDA) and buy and sell orders from the system, BrandSpur banking and finance news reports.
Furthering in her words, she said: “The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also provide guidance to market participants. Authorised dealers are, therefore, required to comply with existing guidelines and regulations governing the Nigerian foreign exchange market.
“They should ensure that all necessary documentation, training, and systems integrations are concluded ahead of the go-live date,” she added.
