|Central Bank governor, Godwin Emefiele|
The Central Bank of Nigeria today announced a flexible foreign exchange regime that would be determined by market forces. Speaking at a news conference in Abuja today June 15th, the Central Bank governor, Godwin Emefiele said under the new plan, the official exchange rate of the naira will exist in a “single flexible window,” which will take off on June 20th.
The flexible policy will see the naira devalue against the dollar while the dual exchange rate policy has been abolished.
The CBN Governor insist that The market shall operate as a single market structure through the inter-bank/autonomous window, The CBN would participate in the Market through periodic interventions to either buy or sell FX as the need arises why the Exchange Rate would be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book.
Accorldy to Naij report,There shall be no predetermined spread on FX spot transactions executed through the CBN intervention with Primary Dealers, while all FX Spot purchased by Authorized Dealers are transferable in the inter-bank FX Market.Primary Dealers shall operate with other dealers in the Inter-bank market, amongst other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) Guidelines, which would also be released immediately after this Press Briefing.
The CBN shall introduce non-deliverable over-the-counter (OTC) Naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian Foreign Exchange Market, which would help moderate volatility in the exchange rate by moving non-urgent FX demand from the Spot to the Futures market, while Sale of FX Forwards by Authorized Dealers to end-users must be trade-backed, with no predetermined spreads. Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorized Dealers at the Daily Inter-Bank Rate; and Non-oil exporters are now allowed unfettered access to their FX proceeds, which shall be sold in the Inter-bank market.
The CBN Governor also explained that primary dealers will be notified by Friday June 17 while other non-primary Dealers would remain valid and eligible to participate in the market Inter-bank trading under the new guidelines will begin on Monday June 20 the tenors and rates for the OTC Naira-settled FX Futures will be announced on Monday June 27