THE Central Bank of Nigeria (CBN) has released new operational changes to the foreign exchange market in line with the rates unification stance of President Bola Ahmed Tinubu.
The apex bank, in the new changes, abolished all segments of the foreign exchange market and collapsed them into the investors and exporters (I&E) window.
The I&E window is regarded as the official window for foreign exchange transactions.
The ICIR had reported that banks are now quoting a market rate based on a willing buyer and a willing seller, according to the emails that they sent to some customers earlier today.
Buyers and sellers of foreign currency in the official foreign exchange market now qoute rates they find comfortable in the market, as against the previous practice where rates were dictated by the Central Bank of Nigeria (CBN), a system some economic analysts condemned as characterised by arbitrage and corruption.
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According to the guidelines signed by the CBN Director, Financial Markets, Angela Sere-Ejembi, applications for medicals, school fees, business travel allowance (BTA)/personal travel allowance (PTA), and small and medium-scale enterprises would continue to be processed through deposit money banks.
The CBN stated that operations in this window would be guided by the extant circular on the establishment of the window, dated April 21, 2017 and referenced FMD/DIR/CIR/GEN/08/007.
It added that all eligible transactions are permitted to access foreign exchange at this window.
The CBN stated that the operational rate for all government-related transactions shall be the weighted average rate of the preceding day’s executed transactions at the I&E window, calculated to two decimal places.
It also announced the proscription of trading limits on oversold foreign exchange positions with permission to hedge short positions with over-the-counter (OTC) futures, adding that the limits on overbought positions shall be zero.
Also, the Order Book was reintroduced to ensure transparency of orders and seamless execution of trades.
The bank also announced the cessation of RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, with effect from 30 June 2023.
Informed analysts believe the new policy would favour banks with positive net foreign exchange exposure, although they admitted it would take some time before it positively impacts on the economy.
An economic analyst, Bode Ososami, posited that the development would remove arbitrage and corruption that had characterised Nigeria’s forex exchange market, adding that the markets would begin to respond to Nigeria in the new direction.
Ososami said, “Sincere investors would come into the market and there is a lot of funds in the market looking for investment direction.
“While this new exchange rate favours banks with positive net FX exposure, as they would book exchange rate gains on this major depreciation of the naira, I would expect many of the banks to raise new equity capital to shore up their capital base soon.”
Also, an economist and Head, Investor Relations at the United Bank for Africa, Abiola Rasaq, said, “Notably, over 40 per cent of Nigerian banks risk-asset base is dollarised, and that means that the risk-weighted asset increases significantly on the back of this depreciation of the naira, and that would put pressure on the capital adequacy ratios of banks.”
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.