Naira Continues to Appreciate at Official Market
The naira has continued to strengthen on the official trading window, the Nigerian Autonomous Foreign Exchange Market, as the Central Bank of Nigeria launched the new Electronic Foreign Exchange Matching System this week.
According to data on the CBN website on Thursday, the naira closed trading at 1,567/$ compared to the closing rate of Wednesday which was 1,608/$.
This marked a steady strengthening from Monday when it closed trading at 1,660/$ from 1,663/$ in the previous trading session.
On Tuesday, the naira closed at 1,625/$.
In the parallel market, the naira has been appreciating also.
As of Thursday, the naira was trading at 1645/$, indicating a 4.64 per cent appreciation in four days.
The Electronic Foreign Exchange Matching System was launched by the CBN on December 1.
In a circular signed by the Director of Currency Operations, CBN, Omolara Duke, it was indicated that authorised dealers would subsequently conduct all foreign exchange transactions in the interbank FX market on the Electronic Foreign Exchange Matching system approved by the apex bank, where transactions would be reflected immediately.
The circular further stated that the new system would enhance transparency and governance and facilitate a market-driven exchange rate that would be accessible to the public.
This development is expected to reduce speculative activities, eliminate market distortions, and give the CBN improved oversight capabilities to regulate the market effectively.
“The CBN will publish real-time prices and buy/sell orders data from the system, and in collaboration with the Financial Market Dealers Association, publish the rules for the EFEMs. The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also guide market participants,” the circular added.
In the revised guidelines, the CBN said, “The pricing of foreign exchange transactions in the NFEM shall be undertaken on the Electronic Foreign Exchange Matching System. FX market statistics including the daily transactional rates of all qualifying transactions on NFEM will be publicly available to guide market participants on the CBN website. b) All customer transactions conducted outside the EFEMS shall be guided by the prevailing NFEM rate at the time of execution.
“Authorised Dealers are required to adopt a transparent pricing framework for customer foreign exchange transactions as described in the Nigeria FX Code and may be requested by the CBN to provide information on their pricing methodology. c) Negotiation of exchange rates with customers outside of the foreign exchange market is prohibited.
“All customer transactions must be concluded with an entity duly licensed to participate in the foreign exchange market (subject to the provisions of the license category).”
