The Central Bank of Nigeria (CBN) has unified all segments of the forex market into a single entity.
POLITICS NIGERIA reports that the decision to collapse multiple windows into one aims to enhance liquidity and stability within the Nigerian Foreign Exchange (FX) Market.
In a press release dated 14 June 2023 and signed by the Director of Financial Markets, Dr. Angela Sere-Ejembi, the CBN outlined a series of immediate changes to the FX market operations.
These changes are as follows:
1. Abolishing the segmentation of the FX market: The previous divisions within the market will be eliminated, and all transactions will now take place through the Investors and Exporters (I&E) window. Market forces will determine the exchange rate in this window. However, applications for medicals, school fees, BTA/PTA, and SMEs will still be processed through deposit money banks.
2. Reintroducing the “Willing Buyer, Willing Seller” model: The CBN will reintroduce this model at the I&E window, allowing eligible transactions to access foreign exchange at their preferred rates.
3. Setting operational rates for government-related transactions: The CBN will establish the operational rate for transactions involving the government as 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 permitting hedging of short positions with OTC futures: Trading limits on oversold positions will no longer be imposed, and short positions can be hedged using Over-The-Counter (OTC) futures. However, there will be zero limits on overbought positions.
5. Reintroducing order-based two-way quotes: Two-way quotes with a bid-ask spread of N1 will be reintroduced to ensure a fixed difference between buying and selling prices. All transactions will be cleared by a Central Counter Party (CCP).
6. Reintroducing an Order Book: An Order Book will be reinstated to promote transparency in order placements and facilitate seamless execution of trades.
Additionally, the CBN has announced the discontinuation of two schemes implemented to boost remittances and forex supply: the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme. These schemes will be terminated effective from 30 June 2023.
