* Reiterates Commitment To Orthodox Banking
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has reiterated the Commitment of the bank to orthodox banking in tackling the menace of inflationary pressures in achieving the monetary policy objectives.
In what observers see as determined efforts at reducing the mounting challenges, particularly at the foreign exchange market and naira exchange rate, the bank is said to have expressed its determination to promote monetary stability and a sound financial system, which are seemingly lacking at present, that have made the economy to remain in comatose and less attractive to investors.
Cardoso, speaking at the post MPC meeting press briefing in Abuja noted that there was no going back on the current approach, highlighting that CBN would deploy every tool at its disposal to curb inflation.
Consequently, CBN raised the Monetary Policy Rate to curb the soaring and embarrassing inflation and enhance the naira’s stability.
The Monetary Policy Committee (MPC) unanimously increased the MPR by 25 basis points, from 27.25 per cent to 27.50 per cent
As a first step towards achieving some of the objectives, CBN has set a minimum trade value of $100,000 for interbank foreign exchange trading via the Electronic Foreign Exchange Matching System.
The directive was dated 25 November 2024 and signed by CBN’s Director of the Financial Markets Department Dr Omolara Duke.
The newly issued guidelines are designed to streamline interbank FX trading and reduce counterparty risks.
By using EFEMS, the CBN aims to create a more transparent and orderly FX market while adhering to its regulatory framework
However, naira settled at N1,750/$ on Wednesday morning at the unofficial market in Nigeria’s major cities, as the local currency continues with its poor outings, creating doubts in the efficacy of the only tool possibly available for the apex bank to achieve its objectives.
Hear Cardoso: “Let me first say that the Central Bank is resolute and committed to continuing to fight the war against inflation. There’s no going back on that. And as I’ve said at previous fora, we are going to deploy everything in our arsenal to ensure that we are able to tame it. And of course this entails the return to Orthodox monetary policies. So, I think it is important to state that up front there’s no going back on that.”
On the $100,000 minimum trade value, Duke saod the development is part of efforts to ensure transparency, efficiency, and compliance within Nigeria’s FX market.
The EFEMS is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations.
The statement also said CBN has designated Bloomberg’s BMatch as the official order-matching platform for interbank transactions, with trading hours set between 9:00 am and 4:00 pm West Africa Time on business days.
The apex bank also said the $100,000 minimum tradable amount comes with incremental clip sizes of $50,000.
The EFEMS is also limited to spot FX transactions involving the Nigerian naira and the United States dollar.
The CBN, however, retained the discretion to introduce other currency pairs when deemed necessary.
The guidelines document read, “All trades consummated on EFEMS are binding unless canceled by mutual agreement of both parties with written approval from the CBN.
“The minimum tradable amount is US$100,000.00, with incremental clip sizes of US$50,000.00.
“Participants must set credit and settlement limits for other counterparties in the system. Transactions exceeding these limits will not be executed.
“Participants must have adequate credit and settlement limits set for the CBN as its counterparty bank.
“Participants are required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.”
Participation in the EFEMS is limited to authorised dealer banks licensed by the CBN, while other institutions wishing to join the platform must first obtain prior approval.
ALSO READ:CBN Moves To Check Speculative Activities, Distortions In FX Market, Introduces Matching System
They are also required to execute agreements with the CBN-approved platform provider, maintain accurate profiles, and operate within prescribed credit and settlement limits.
Withdrawal from the platform must be preceded by a 30-day notice, along with the resolution of any outstanding obligations.
Also, trades conducted via the platform will remain anonymous until matched. Counterparty details will only be revealed once transactions are concluded, in line with settlement protocols.
Transactions exceeding set limits or conducted outside EFEMS parameters must be reported promptly and logged onto the FX blotter within 10 minutes.
The CBN emphasised that it will closely monitor all transactions on EFEMS to ensure market integrity and transparency.
Participants are required to submit daily reports detailing trade volumes, settlement statuses, and counterparties.
The central bank also reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.
Any violations of the EFEMS guidelines or related regulations will attract strict penalties, including the suspension or revocation of access rights.
The CBN further stated that it will periodically review the platform’s operations to ensure efficiency and compliance with its directives.
The CBN also announced that the Bloomberg BMatch system will officially go live as the EFEMS for foreign exchange trading on December 2, 2024.
