THE Central Bank of Nigeria (CBN) has set out a two-week period in November to test run a new policy on the foreign exchange (FX) aimed at checking market distortions, eliminating speculative activities and instilling transparency.

The apex bank disclosed this on Thursday, October 3 in a circular signed by its director of financial markets department, Omolara Duke.

The new policy, the Electronic Foreign Exchange Matching System (EFEMS), was announced by CBN in the circular dated October 2.

“The Central Bank of Nigeria (CBN) hereby announce the introduction of the Electronic Foreign Exchange Matching System (EFEMS), for foreign exchange transactions in the Nigerian Foreign Exchange Market (NFEM) to be implemented not later than December 1, 2024. There will be a 2-week test run in the month of November 2024,” the apex bank said.

Authorised dealers are to conduct all FX transactions in the inter-bank market on the EFEMS approved by the CBN where transactions will be reflected immediately, it explained.

“The new system is expected to enhance governance and transparency and facilitate a market-driven exchange rate that will be accessible to the public.

“This development is expected to reduce speculative activities, eliminate market distortions and give the CBN improved oversight capabilities to effectively regulate the market,” it stated.

According to CBN, it will publish real-time prices and buy/sell orders from the system.

It will further publish the rules for the EFEMS in collaboration with the Financial Markets Dealers Association (FMDA).

It added that the Nigeria Foreign Exchange Code (FX Code) and the Revised Market Operating Guidelines will provide guidance to market participants.

“Authorised dealers are therefore required to comply with extant guidelines and regulations governing the Nigeria foreign exchange market and ensure that all necessary documentation, training and systems integrations are concluded ahead of the go live date,” CBN maintained.

A draft exposure of the Nigeria FX Code was later released by the CBN on Thursday, October 3.

The code is developed in response to changes and sets out standards which aim to holistically strengthen and promote the integrity and effective functioning of the wholesale foreign exchange (FX) market in Nigeria.

It will facilitate better functioning of the market, further reinforcing Nigeria’s flexible exchange rate regime.

“The FX Code is intended to promote a robust, fair, liquid, open, and appropriately transparent    Market in which a diverse set of Market Participants, supported by resilient infrastructure, can confidently and effectively transact at competitive prices that reflect available market information in a manner that conforms to accepted global standards of behaviour and best practices,” CBN stated.

It said the FX Code applies to market participants – banks licensed by the Central Bank of Nigeria under the CBN Act 2007 and Bank and Other Financial Institutions Act (BOFIA) 2020 and engage in the wholesale foreign exchange business in Nigeria as part of their licensed business.

The FX Code is organised around six leading principles which are ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.

In the past year, CBN Governor Olayemi Cardoso and his team have been making frequent interventions in the Nigerian FX market following the constant pressure and depreciation of the naira.

Earlier this year, the naira had peaked at N1,900 to the dollar.

On Thursday, the Naira traded at N1,659.26 per dollar at the official market and N1,665 at the parallel market

Last year, after assuming office, CBN governor Cardoso floated the naira, which has worsened Nigeria’s economy, resulting in the high cost of commodities and operating costs for companies and fuelling inflation pressure and the hardships Nigerians faced.

Many multinational companies exiting and divesting their investment from the Nigerian market have blamed CBN’s exchange rate unification policy for the losses reported from their operations in the past year.

The ICIR reported that the apex bank early this year resumed the sales of dollars to the Bureaux de Change (BDC) retail end of the market to stabilise the currency market and has continued to do so as naira fails to strengthen against other currencies.