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CBN unveils new forex market guidelines; says ‘FX rate to be purely market-driven’

CBN Governor, Godwin Emefiele
CBN Governor, Godwin Emefiele
The much-anticipated set of guidelines on the country foreign exchange (forex) policy has been officially unveiled by the Central Bank of Nigeria.
The guidelines come after more than a year of uncertainty by local and foreign investors over the economic policy direction of the country amid a sliding naira, capital flight and growing inflation figures in the country.
Governor of the Central Bank, Godwin Emefiele released the guideline in a press conference on Wednesday.
Highlight of the document as unveiled by Emefiele, include that:
1. The FX will operate as single market through the interbank
2. The FX Rate will be purely market-driven
3. CBN will participate through periodic interventions
4. FX primary dealers will be registered to deal directly with the CBN for large deal sizes.
5. FX primary dealers will deal with other authorised dealers
6. There will be no more spread restrictions
7. The 41 items classified for not valid for FX are still not admissible in FX interbank market
8. CBN may offer long-tenored FX forwards
9. Selling of FX forwards must be trade backed with no pre-determined spreads
10. Over the Counter FX futures will be introduced. The OTC FX futures are bespoke and volumes could be non-standard
11. Non-oil exporters are now allowed unfettered access to export proceeds via the interbank market Timelines
12. Guidelines of the general FX market will be released immediately
13. Guidelines for FX primary dealers will be released immediately
14. FX primary dealers will be appointed and notified by June 17, 2016
15. Interbank FX trading under the new guidelines will begin on June 20, 2016
Additional details will be released as soon they are published by the Central Bank.
It would be recalled that the CBN governor, earlier Wednesday, disclosed that a foreign exchange interbank trading window when unveiled would boost the supply of hard currency in Africa’s biggest economy.
The window’s exchange rate will be purely market-driven, Godwin Emefiele told reporters. The new system would help with economic growth and restore investor confidence.
The new window, according to him, would have eight to ten primary traders handling minimum volumes of $10 million.
Nigeria has been suffering from foreign exchange shortages due to a slump in oil revenues which have crippled public finances and hit currency reserves.

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