The Central Bank of Nigeria (CBN) has issued new guidelines aimed at promoting transparency, liquidity, and price discovery in the foreign exchange (FX) market, ensuring overall stability and boosting customer confidence. In a press statement titled “CBN Issues Further Guidance on Operational Changes to Foreign Exchange Market,” Dr. Isa Abdulmumin, the Director of Corporate Communications at the CBN, outlined the key measures implemented.
Following an extraordinary Bankers’ Committee meeting held on June 16, 2023, the CBN announced that all visible and invisible transactions, including medicals, school fees, business travel allowance/personal travel allowance (BTA/PTA), airline remittances, and other remittances, are eligible for the Investors’ and Exporters’ (I&E) window. Deposit Money Banks (DMBs) were directed to ensure the expeditious processing of these eligible invisible transactions on behalf of their customers using the applicable rate at the I&E window.
The CBN also emphasized that ordinary domiciliary account holders would have unrestricted access to funds in their accounts. They are allowed to utilize cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer. However, DMBs are required to provide returns to the CBN, including the purpose of such transactions.
This development marks a significant shift in the nation’s monetary policy, allowing individuals greater flexibility in managing their funds held in domiciliary accounts.
The new directive provides further guidance to banks on the operational changes to the foreign exchange market.
The CBN in an official statement signed by its Director for Financial Markets, Angela Sere-Ejembi confirmed the operational changes to the foreign exchange market.
The apex bank also affirmed that the abolishment of segmentation and all segments are now collapsed into the Investors and Exporter’, I & E window.
With that, the CBN in a way directed commercial banks to remove the cap on the naira at the investors’ and exporters’ window. It simply means that commercial banks can trade foreign exchange at any rate in the Investors & Exporters window based on a willing buyer, willing seller arrangements.
Giving perspective to the operational charges of the foreign exchange market, Nigeria’s apex bank stated that applications for medicals, school fees, BTA/PTA and SMEs would continue to be processed through deposit money banks.
It also announced the cessation of the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, effective June 30, 2023. The apex bank on Friday via its Twitter handle, however, gave an update on the operational changes to the Foreign Exchange (FX) Market, explaining how it works.
“To collapse all segments in the fx market into the Investors and Exporter’, I & E window means all eligible FX transactions in the market shall only be done via the I&E window, all other windows cease to exist,” the CBN wrote.
“The I & E market functions by a willing buyer, willing seller system, where an entity with demand for FX seeks out another entity with FX to sell at an agreed price through an authorised dealer.
Meanwhile, the drastic change to the Foreign Exchange Market is coming amid the suspension of Godwin Emefiele as CBN governor by President Bola Ahmed Tinubu (BAT).
Recall that Tinubu during his inaugural speech as president on May 29 had pledged to unify the country’s foreign exchange market and boost investors’ confidence
