The Central Bank of Nigeria (CBN) has announced the introduction of a new system designed to enhance transparency in the foreign exchange market.
This system, called the Electronic Foreign Exchange Matching System (EFEMS), will facilitate foreign exchange (FX) transactions in Nigeria.
Omolara Duke, the Director of the Financial Markets Department at CBN, revealed that the system is set to be implemented by December 1.
The primary aim of the EFEMS is to improve governance and transparency in the Nigerian Foreign Exchange Market (NFEM).
Duke emphasized that the system would also help establish a market-driven exchange rate accessible to the public.
“This development is expected to reduce speculative activities, eliminate market distortions, and give the CBN improved oversight capabilities to effectively regulate the market,” she explained.
With the introduction of EFEMS, all foreign exchange transactions in the interbank FX market will be conducted through this new platform.
Authorized dealers will carry out transactions approved by the CBN, with the results reflected in real time.
“This will ensure that all foreign exchange activities are visible and traceable, creating a more reliable environment for market participants,” Duke stated.
The CBN plans to conduct a two-week test run for the EFEMS in November before the official launch.
During this trial period, the bank will ensure that the system functions smoothly and addresses any potential issues.
Once operational, the CBN will publish real-time prices of transactions conducted through EFEMS.
Duke indicated that the CBN will collaborate with the Financial Markets Dealers Association (FMDA) to set rules for the EFEMS.
“We will buy and sell orders from the system and work closely with FMDA to publish the guidelines necessary for all market participants,” she noted.
This collaborative effort aims to create a structured framework for the effective functioning of the new system.
The CBN expects all authorized dealers to comply with existing guidelines and regulations governing the Nigerian foreign exchange market.
Dealers will need to ensure that all necessary documentation, training, and system integrations are completed ahead of the go-live date.
“By adhering to these guidelines, dealers can help create a stable and transparent foreign exchange market in Nigeria,” Duke added.
Speculation in the foreign exchange market has long been a concern in Nigeria.
Market distortions have led to significant fluctuations in exchange rates, impacting both businesses and consumers.
The CBN’s introduction of the EFEMS is a proactive step towards curbing these speculative activities.
Duke stated, “By enhancing transparency and providing real-time data, we hope to discourage speculative practices and promote a healthier market environment.”
Nigeria’s foreign exchange market has faced various challenges in recent years.
Issues such as scarcity of foreign currency and high demand have led to the depreciation of the naira against other currencies.
Many businesses and individuals have struggled with the rising costs of importing goods and services due to fluctuating exchange rates.
The announcement of the EFEMS has garnered mixed reactions from the public and economic experts.
Others remain cautious, expressing concerns over the execution of the new system.
The CBN’s commitment to transparency and regulation will be crucial in achieving this goal.
With the test run approaching, stakeholders are eager to see how the new system will operate and its potential impact on the market.
Duke reassured that the CBN is dedicated to making necessary adjustments based on feedback during the trial period.
“We are committed to creating a foreign exchange market that works for everyone. We believe that with EFEMS, we can achieve this,” she concluded.
