CBN Removes Limits on FX Transactions Between Access, Zenith, UBA, Others
- The Central Bank of Nigeria has stopped the daily limit on interbank foreign exchange transactions
- This comes after recent policy changes, including the recent limits on how much banks can hold in foreign currencies
- It stated that this is part of its effort to promote a market-based price discovery system
Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
The Central Bank of Nigeria has assured that its ongoing foreign exchange reform is directed at promoting a market-based price discovery system.
Source: UGC
This is contained in a circular by the bank duly signed by Duke Omolara Omotunde, director, financial markets department.
It also stated that it has discontinued any cap on the spread of interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.
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It stated:
“A key objective of the ongoing foreign exchange market reform by the Cenral Bank of Nigeria is to promote a market-based price discovery system.
“Consequently, the bank hereby discontinues any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.
“Authorised dealers are to continue to conduct their foreign exchange transactions on a ‘willing buyer and willing seller’ basis. In addition, they are to strictly adhere to high ethical standards in their dealings in the foreign exchange markets.
“This includes, but not limited to, adopting appropriate price disclosure and transparency for transactions.”
The bank also added that all executed transactions are to be recorded immediately on the relevant treasury system and reported to market authorities as stipulated.
This comes after the CBN recently imposed limits on how much banks can hold in foreign currencies.
In a circular released on Wednesday, January 31, 2024, the CBN expressed concerns about the growth of forex exposures on their balance sheets as the naira continued to depreciate against the US dollar.
This happened after the market regulator, FMDQ Exchange, changed its closing rate calculation methodology for the naira.
Charles Abuede, a financial analyst perceives that the CBN could be experimenting with various models to ensure fx stability and appreciation in the naira value until it gets it right.
He added that the recent move could further be seen as means to clip wings of BDCs and other fx traders as the willing buyer and willing seller model comes into full force and takes away the spread being earned by these traders.
He said,
"In my view, I think the CBN is already on the move to attain positive application of policy tools to ensure naira stability and further encourage other forms of price discovery in the near term. However, the jury is out there to see if the policy direction of the apex bank is effectively applied for the naira defence."
Banks to pay money from abroad in naira
Legit.ng reported that the CBN's updated criteria for domestic international money transfer operations have been fully implemented by Nigerian banks.
In an effort to increase the supply of foreign exchange and starve black market dealers, the CBN amended the rules governing the operations of international money transfer operators (IMTOs) and directed banks to start paying dollars and other foreign currency payouts from overseas in naira.
Nigerian banks have responded to the new regulations by providing their clients with explanations in letters.
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Source: Legit.ng
