The Central Bank of Nigeria (CBN) has announced the upcoming implementation of an Electronic Foreign Exchange Matching (EFEM) system, aimed at streamlining foreign exchange transactions in the interbank market. In a circular issued by Dr. Omolara Duke, Director of Currency Operations at the CBN, it was confirmed that a two-week test run will take place in November 2024 before the official launch.
The new system, authorized for use by dealers in the interbank foreign exchange market, will facilitate immediate transaction reflections. According to the circular, this initiative is expected to enhance transparency and governance within the market while fostering a market-driven exchange rate accessible to the public. It aims to reduce speculative activities and market distortions while providing the CBN with improved oversight capabilities for effective market regulation.
“The CBN will publish real-time prices and buy/sell order data from the system, working in collaboration with the Financial Market Dealers Association to establish the rules for EFEMs. Additionally, the Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will guide participants,” the circular stated.
Dr. Duke emphasized that previous market panic and front-loading of requests have subsided, attributing this calmness to the return of liquidity in the market.
Carlos Cardoso, a key figure in the CBN, highlighted the success of merging disparate exchange rates into a more cohesive system, stating, “We had two different rates; right now, we more or less have one rate. This is beneficial as it allows companies to plan effectively.” He underscored the importance of a stable exchange rate for economic planning and investment.
Furthermore, Cardoso expressed confidence in the current market dynamics, where buyers and sellers operate freely, contributing to the stability of the Naira. However, he stressed the need for continuous monitoring and management to ensure that the market remains beneficial for all participants.
He also noted the crucial role of coordinated monetary and fiscal policies in achieving economic stability, asserting that collaboration is essential for managing the macroeconomic fundamentals that influence the market and ensuring optimal value for the Naira.
This announcement comes in the wake of Nigeria’s inflation rate, which surged to a 28-year high of 33.95% in May 2024. However, recent data from the National Bureau of Statistics indicates a slowdown in month-on-month inflation rates for the third consecutive month, validating the effectiveness of the CBN’s monetary policy tightening measures.
