The Central Bank of Nigeria (CBN) has announced the unification of all segments of the forex market collapsing all windows into one.
This was part of a series of immediate changes to operations in the Nigerian Foreign Exchange (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:
1. 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.
2. Reintroducing the “Willing Buyer, Willing Seller” model at the I&E window, where all eligible transactions can access foreign exchange at their preferred rates.
3. 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.
4. Prohibiting trading limits on oversold FX positions and allowing hedging of short positions with OTC futures. Limits on overbought positions will be zero.
5. Reintroducing order-based two-way quotes, with a bid-ask spread of N1. All transactions will be cleared by a Central Counter Party (CCP).
6. Reintroducing an Order Book to ensure transparency of orders and seamless execution of trades.
7. 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.
Based on the changes mentioned in the news, the exchange rate in the Nigerian Foreign Exchange (FX) Market will now be determined by market forces.
Finally, the move towards a single window and the use of market forces to determine the exchange rate signifies a shift toward a more flexible and market-driven exchange rate system, which can bring about greater liquidity and stability in the Nigerian FX Market.
Download the CBN Forex Circular
The Senate on Thursday approved President Bola Tinubu’s loan request of $2.2 billion to partially…
A former presidential spokesman, Doyin Okupe has dismissed claims by Peter Obi of the Labour…
Leading Igbo Socio-cultural Organisation, Ohanaeze Ndigbo, has commended the arrest of self-acclaimed Biafra Prime Minister,…
A car dealer has gifted Nigerian singer Davido a new vehicle for his birthday. …
There is palpable tension in the Peoples Democratic Party (PDP) after the acting National Chairman…
The Arewa Consultative Forum says the policies of the President Bola Tinubu-led administration has worsened…