The Central Bank of Nigeria, CBN, on Wednesday announced a “purely” market-driven” window for interbank foreign exchange trading, a departure from a fixed exchange rate the country has adopted over the years.
The new intended to increase supply of hard currency into the Nigerian economy.
Godwin Emefile, the governor of Central Bank of Nigeria said with the new forex guidelines, a full float of the Naira, which will make the foreign exchange, forex, rate to be now determined by market forces has now been introduced. The apex bank however said will intervene in the market “as the need arises”. Here are the key highlights of the new policy:
- The Market will operate as single market through the interbank
- The FX Rate (foreign exchange) will be purely market-driven
- CBN will participate through periodic interventions
- FX primary dealers will be registered to deal directly with the CBN for large deal sizes.
- FX primary dealers will deal with other authorised dealers
- There will be no more spread restrictions
- The 41 items classified for not valid for FX are still not admissible in FX interbank market
- CBN may offer long-tenored FX forwards
- Selling of FX forwards must be trade backed with no pre-determined spreads
- Over the Counter FX futures will be introduced. The OTC FX futures are bespoke and volumes could be non-standard
- Non-oil exporters are now allowed unfettered access to export proceeds via the interbank market
Timelines
- Guidelines of the general FX market will be released immediately
- Guidelines for FX primary dealers will be released immediately
- FX primary dealers will be appointed and notified by June 17, 2016
- Interbank FX trading under the new guidelines will begin on June 20, 2016