EkoHotBlog reports that the Central Bank of Nigeria (CBN) has announced the unification of all segments of the forex exchange (FX) market.
This was part of a series of immediate changes to operations in the FX Market, in a bid to improve liquidity and stability.
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According to a press release signed by the Director of Financial Markets, Angela Sere-Ejembi, PhD, and dated 14 June 2023, the changes include:
- Abolishing the segmentation of the FX market into different windows. All transactions will now be done through the Investors and Exporters (I&E) window, where the exchange rate will be determined by market forces. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.
- Reintroducing the “Willing Buyer, Willing Seller” model at the I&E window, where all eligible transactions can access foreign exchange at their preferred rates.
- Setting the operational rate for all government-related transactions at the weighted average rate of the previous day’s executed transactions at the I&E window, rounded to two decimal places.
- Prohibiting trading limits on oversold FX positions and allowing hedging of short positions with OTC futures. Limits on overbought positions will be zero.
- Reintroducing order-based two-way quotes, with a bid-ask spread of N1. All transactions will be cleared by a Central Counter Party (CCP).
- Reintroducing an Order Book to ensure transparency of orders and seamless execution of trades.
- The CBN also announced the cessation of two schemes that were introduced to boost remittances and forex supply: the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, effective from 30 June 2023.
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With the emergence of market forces as the major determinants of exchange rates the currency price will tow a floating exchange rate model.
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