The Central Bank of Nigeria (CBN) has announced the introduction of an Electronic Foreign Exchange Matching System (EFEMS) to transform the country’s foreign exchange market, by enhancing transparency of operations.
The new digital system is expected to be operational in the Nigerian foreign exchange market by December 1, 2024, following a two-week test planned for November.
The Electronic Currency Matching Method (EFEMS) is expected to reshape the way foreign exchange transactions are carried out in the interbank market by improving transparency and promoting a market-driven and publicly accessible exchange rate.
This Friday’s Punch newspaper report cites a circular from the CBN’s Director of Financial Markets Department, Omolara O. Duke, according to which the Electronic Foreign Exchange Market Transparency Enhancement System (EFEMS) will require all authorized dealers to that they carry out foreign exchange transactions on the platform, ensuring that the transactions are immediately reflected in the market.
« The Central Bank of Nigeria hereby announces the introduction of the Electronic Currency Matching System for foreign exchange transactions in the Nigerian foreign exchange market, which will be implemented on or before December 1, 2024. There will be a test two weeks in November 2024.
Licensed dealers will subsequently conduct all foreign exchange transactions in the interbank foreign exchange market through the CBN approved electronic currency matching system, where transactions will be reflected immediately », Indicates the circular.
The new system comes at a critical time, as Nigeria continues to suffer from currency instability and speculative trading, which have contributed to market distortions.
By leveraging the EFEMS, the CBN aims to minimize these speculative activities while providing real-time data on exchange rates, including buy and sell orders.
The new system is expected to improve governance and transparency and facilitate a market-oriented exchange rate, which will be accessible to the public. This development is expected to reduce speculative activities, eliminate market distortions and give the CBN better supervisory capabilities to effectively regulate the market.
« The CBN will publish real-time prices and buy and sell orders from the system and, in collaboration with the Financial Markets Dealers Association, publish the EFEMS rules. The Nigerian Foreign Exchange Code and the Revised Guidelines for the Operation of the Nigerian Foreign Exchange Market will also provide guidance to market participants », adds the circular.
GIK/lb/te/Sf/APA
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