Central Bank of Nigeria, CBN, has removed the ±2.5% cap spread on interbank FX transactions.
Gatekeepers News reports that the CBN in a circular dated February 8, stated that restrictions on the sale of interbank proceeds have also been removed.
The CBN Director of Financial Markets, Omolara Omotunde Duke, in the circular said the directive was in line with the objectives of the CBN’s current FX market reforms, which is to promote a “market-based price discovery system.”
The Circular said, “A key objective of the ongoing foreign exchange market reforms by the Central Bank of Nigeria to promote a market-based price discovery system.
“Consequently, the Bank hereby discontinues any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.
“Authorized Dealers are to continue to conduct their foreign exchange transactions on a “Willing Buyer and Willing Seller” basis.
“In addition, they are to strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but not limited to adopting appropriate price disclosures and transparency for transactions.”
The statement added, “Please note that all executed transactions are to be recorded immediately on the relevant treasury systems and reported to market authorities as stipulated.”
In August 2023, the CBN in a circular referenced TED/FEM/PUB/PC/001/006, directed an exchange rate cap spread of ±2.5% of NAFEM’s previous day’s closing rate, for International Money Transfer Operators (IMTOs) and banks.
Nevertheless, the CBN on January 31, released another circular removing the exchange rate cap for IMTOs. The move by the CBN aligns with the idea of liberalizing the market in order to allow the market to move in line with current market realities.
