Nigeria’s Central Bank Looks to E-Platform to Curb Fx Speculation

The Central Bank of Nigeria (CBN) has announced the launch of the Electronic Foreign Exchange Matching System (EFEMS), set to go live on December 1, following a two-week test run in November.

The new platform will facilitate all interbank foreign exchange (FX) transactions, offering real-time execution and transparency in the Nigerian Foreign Exchange Market (NFEM), and is expected to curb speculative trading, eliminate market distortions, and enhance CBN’s regulatory oversight capabilities.

The CBN will also publish real-time prices and buy/sell orders from the system and work with the Financial Markets Dealers Association (FMDA) to establish operational rules for EFEMS. A new FX Code, effective October 14, and revised Market Operating Guidelines will guide market participants.

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Key Takeaways

The CBN’s move to digitize forex transactions is part of Yemi Cardoso’s reforms to stabilize the market and improve systems. EFEMS aims to enhance governance, transparency, and market-driven rates, addressing inefficiencies and speculation in traditional systems. This mandatory platform allows tighter regulatory oversight and better management of Nigeria’s interbank forex market. Since liberalizing the forex market in June 2023, the CBN has been working to eliminate arbitrage and market distortions. Other measures include revised guidelines for Bureau De Change operations and significantly increasing capital requirements for tier-1 BDCs from N35 million to N2 billion. These efforts collectively seek to create a more efficient, transparent, and stable forex market in Nigeria.

By Daba Finance.