Naira to Finally Gain Massively Against Dollar as CBN Commences FX Matching System
- The new Electronic Foreign Exchange Matching System is expected to curb speculation and market distortions
- The launch will bring about the anticipated recovery in the value of the naira across markets amongst other expectation
- The use of EFEMS, according to experts, will ensure compliance with accepted norms that promote transparency and accountability
Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
The CBN recently implemented a forex strategy, which was announced last month and confirmed over the weekend by CBN Governor Olayemi Cardoso.
Source: UGC
The development has a number of ramification which includes the anticipated recovery in the value of the naira across markets.
With the launch of the Electronic Foreign Exchange Matching System (EFEMS), supported by the Central Bank of Nigeria (CBN), The Nation reported that the days of foreign exchange (forex) speculation and market distortions are past.
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The implementation of the forex strategy, which was announced last month and confirmed over the weekend by CBN Governor Olayemi Cardoso, has a number of ramifications for all financial market segments that deal with forex, including the anticipated recovery in the value of the naira across markets.
How the launch of EFEMS will help naira
Nigeria is experiencing a severe foreign exchange crisis as the availability of dollars in the country has been made worse by speculators and illegal dealers who have distorted the market.
In order to provide the CBN with better supervision capabilities to effectively manage the market, lower the rate of speculation, and stabilize the foreign exchange market, the system was introduced.
In partnership with the Financial Markets Dealers Association (FMDA), the CBN will release the EFEMS rules of engagement for authorized dealers and customers.
Market players can also get assistance from the updated market operating rules and the Nigerian forex code.
The launch of the EFEMS is a positive step, according to Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON).
He asserts that the EFEMS will not only restore order to the market but also guarantee that new players, such as post-capitalization Bureau De Change Operators, will fit in and adhere to established standards that encourage accountability and openness.
Gwadabe said,
“It is a good development as the CBN has cleared post recapitalization BDCs to participate in the new EFEMs platform. Section 2.0 of the BDCs operational guidelines recognizes post-recapitalisation BDCs to participate in the EFEMS by purchasing interbank proceeds from banks”.
Cardoso said that because to favorable policy conditions, monthly remittances have doubled, rising from an average of $300 million in 2023 to around $600 million in August 2024.
According to Cardoso, the present naira conversion rate is not indicative of the local currency's actual worth.
He said the apex bank believes that the current US dollar exchange rate does not accurately reflect the naira's genuine market worth because it only reflects the amount that the most desperate purchasers are ready to pay.
By improving the naira's price discovery process, the CBN chief stated that the apex bank anticipates that the implementation of the electronic marketing system will rectify these distortions.
He added that the action will greatly strengthen the central bank's supervision and integration capacities, guaranteeing a more stable and open foreign exchange market.
CBN Makes Changes to Forex Trading
Legit.ng reported that the Central Bank of Nigeria has issued new guidelines requiring interbank foreign exchange trading using the Electronic Foreign Exchange Matching System to have a minimum trade size of $100,000.
This is in an attempt to ensure efficiency, transparency, and compliance in Nigeria's foreign exchange market.
The guideline was signed by Dr. Omolara Duke, director of the CBN's financial markets department, on November 25, 2024.
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Source: Legit.ng
