The Central Bank of Nigeria (CBN) has released revised guidelines aimed at deepening operations in the Nigerian Foreign Exchange Market (NFEM). The updated framework, outlined in a circular dated November 29, 2024, introduces new measures for Authorized Dealers, Bureaux de Change operators, and other market participants.

Key Highlights:

1. Consolidation and Regulation:

• The CBN emphasized its commitment to transparency by consolidating all windows in the official FX market. This measure supersedes earlier guidelines, including the operational changes announced in June 2023 and the establishment of the Investors’ and Exporters’ FX Window in 2017.

2. Obligations for Authorized Dealers:

• Dealers are mandated to facilitate FX transactions for both individuals and firms, ensure compliance with regulations, and provide clear pricing structures.

• All FX transactions must occur through authorized entities, with unlicensed intermediaries strictly prohibited.

3. Bureaux de Change Operations:

• Licensed BDC operators are now permitted to purchase foreign exchange from Authorized Dealers under strict monthly caps set by the CBN. These transactions must adhere to the terms of their respective licenses.

4. Ethics and Compliance:

• All participants must comply with the Nigerian FX Code and ensure professional conduct in all transactions. Documentation for all eligible transactions must be verified and properly maintained for audit purposes.

5. Enhanced Pricing and Transparency:

• FX transactions in the NFEM will now be conducted through the Electronic Foreign Exchange Matching System (EFEMS). The CBN will publicly share daily transaction statistics to enhance market visibility.

• Direct negotiation of exchange rates outside the formal FX market framework is prohibited.

6. Interbank Trading Framework:

• Authorized Dealers are allowed to trade in the interbank market under newly defined credit limits. The circular also introduces the implementation of Bloomberg BMATCH for FX trading.

• Market Makers will play a key role in providing liquidity, offering two-way quotes daily in standard spreads.

Implications for the Market:

The revised guidelines aim to foster confidence in the FX market, curb illegal trading activities, and ensure compliance with global best practices. Market participants are expected to adhere to these rules to stabilize exchange rates and promote economic growth.

Stakeholders have until the end of the year to align their operations with these directives. The CBN has reiterated its commitment to monitoring compliance and applying sanctions where necessary.

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