The Central Bank of Nigeria (CBN) has announced the launch of the Electronic Foreign Exchange Matching System (EFEMS) to address distortions in the forex market, eliminate speculative activities, and promote transparency, all with the goal of transforming the country’s foreign exchange market.
According to the circular signed by the Director of Financial Markets Department, Omolara Duke the EFEMS will require all authorized dealers to conduct FX transactions using the platform approved by CBN, ensuring that these transactions are promptly reflected in the market. “CBN will publish real-time prices and buy/sell orders data from the system, and in collaboration with the Financial Markets Dealers Association, publish the rules for the EFEMS.
It further reads that “The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also provide guidance to market participants.”
The partnership between the CBN and the Financial Markets Dealers Association will ensure that the rules governing EFEMS are clearly defined, supported by updated Market Operating Guidelines and the Nigerian FX Code, which will offer additional clarity to participants.
This new policy is expected to be operational in the Nigerian Foreign Exchange Market by December 1, 2024, with a two-week test run scheduled for November.
The EFEMS is expected to improve governance and transparency while promoting a market-driven exchange rate that will be accessible to the public. The Apex bank noted that the introduction of EFEMS is seen as a strategy to strengthen regulatory oversight, ensuring the Nigerian FX market functions more smoothly and efficiently.
CBN stated that all authorized dealers are required to adhere to existing regulations and ensure that all necessary documentation, training, and system integrations are completed before the go-live date.
This new policy is being introduced at a critical time as Nigeria faces challenges with currency instability and speculative trading, which have contributed to market distortions. By utilizing the EFEMS, the CBN aims to reduce these speculative activities while providing real-time data on exchange rates, including buy and sell orders.
