The Central Bank of Nigeria (CBN) has introduced new guidelines for interbank foreign exchange trading through the Electronic Foreign Exchange Matching System (EFEMS), setting a minimum trade value of $100,000.
This directive, signed by Dr. Omolara Duke, Director of the Financial Markets Department, and dated November 25, 2024, is aimed at fostering transparency, efficiency, and adherence to regulatory standards in Nigeria’s FX market.
Key Provisions of the Guidelines:
- Platform Designation:
The CBN has selected Bloomberg’s BMatch platform as the official order-matching system for interbank FX transactions. Trading hours are fixed from 9:00 a.m. to 4:00 p.m. West Africa Time on business days. - Minimum Trade Requirements:
- A minimum trade size of $100,000 has been stipulated, with incremental clip sizes of $50,000.
- The system is currently restricted to spot FX transactions between the naira and the US dollar. The CBN may introduce other currency pairs in the future.
- Binding Transactions:
- Trades executed on EFEMS are binding unless canceled through mutual agreement and with prior written approval from the CBN.
- Transactions exceeding set credit or settlement limits will not be executed.
- Eligibility and Compliance:
- Participation is restricted to authorised dealer banks licensed by the CBN.
- Prospective participants must seek approval from the CBN and sign agreements with the platform provider.
- Participants are also required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.
- Transparency and Reporting:
- Transactions remain anonymous until matched, with counterparties revealed only upon conclusion of trades.
- Trades conducted outside EFEMS parameters must be reported within 10 minutes and logged onto the FX blotter.
- Daily reports on trade volumes, settlement statuses, and counterparties must be submitted to the CBN.
- The CBN retains the right to publish trade data for market analysis while respecting confidentiality agreements.
Penalties and Oversight:
Violations of EFEMS guidelines will attract strict penalties, including suspension or revocation of access rights. The CBN will monitor all transactions closely to ensure market integrity and will periodically review EFEMS operations for efficiency and compliance.
Implementation Timeline:
The Bloomberg BMatch platform is set to go live as the EFEMS for FX trading on December 2, 2024. The CBN has directed all authorised dealer banks to onboard the system and liaise with Bloomberg representatives to resolve technical or operational issues.
The central bank emphasized that the platform aims to enhance uniformity and streamline FX trading while enabling the CBN to monitor market activity effectively.
