Central Bank of Nigeria (CBN) has revealed plans to launch an Electronic Foreign Exchange Matching System (EFEMS) to modernise the country’s foreign exchange market.
Gatekeepers News reports that the system will become operational in the Nigerian Foreign Exchange Market by December 1, 2024, after a two-week test run in November.
It is anticipated that EFEMS will revolutionise how foreign exchange transactions are carried out in the interbank market by improving transparency and facilitating a market-driven exchange rate that is accessible to the public.
According to a circular by the Director of the Financial Markets Department at the CBN, Omolara O. Duke, the EFEMS will require all authorised dealers to conduct FX transactions using the platform, ensuring that transactions are immediately reflected within the market.
The circular read, “The Central Bank of Nigeria hereby announces the introduction of the Electronic Foreign Exchange Matching System for foreign exchange transactions in the Nigerian Foreign Exchange Market to be implemented no later than 1 December 2024. There will be a two-week test run in November 2024.
“Authorised dealers will subsequently conduct all foreign exchange transactions in the interbank FX market on the Electronic Foreign Exchange Matching System approved by the CBN, where transactions will be reflected immediately.”
The new system comes at a critical time as Nigeria continues to grapple with currency instability and speculative trading, which have contributed to market distortions.
By leveraging the EFEMS, the CBN aims to minimise these speculative activities while offering real-time data on exchange rates, including buy/sell orders.
The circular added, “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.
“The CBN will publish real-time prices and buy/sell orders data from the system, and in collaboration with the Financial Markets Dealers Association, publish the rules for the EFEMS. The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also provide guidance to market participants.”
The collaboration between the CBN and the Financial Markets Dealers Association will ensure that the rules guiding EFEMS are clearly defined, with updated Market Operating Guidelines and the Nigerian FX Code providing further clarity to participants.
The CBN’s introduction of EFEMS is seen as a strategy to bolster regulatory oversight, ensuring the Nigerian FX market functions more smoothly and efficiently.
As the system prepares to go live, authorised dealers must comply with existing regulations and complete the necessary documentation, training, and system integration before the implementation deadline.
