CBN has issued 8 new forex directives to Banks, Others.
NewsOnline reports that the Central Bank of Nigeria (CBN) has released new directives to reduce the restrictions in the foreign exchange market after the suspension of the apex bank governor, Godwin Emefiele.
In a circular seen by NewsOnline Nigeria, issued on 5 June 2023, by the Director, Financial Markets Department of the CBN, Alvan Ikoku, the apex bank asked forex-authorized dealers to sell the excess FX at their possession without first seeking approval from the financial regulator.
ALSO: Tinubu Government To Earn N124bn From New Import Tax Finance Bill 2023
This directive followed the speech of President Bola Tinubu during his inauguration. He promised investors that his government will review existing monetary policies in order to free up more foreign exchange in the forex market.
Authorised dealers buying forex from another authorised dealer have been instructed not to keep the purchased forex overnight or sell to another Authorised Dealer.
This means dollars, euros or pounds sold by the banks to accredited forex traders in the official market must not be sold to another accredited trader and the foreign exchange must be sold out before the next day.
NewsOnline Nigeria understands that this decision will boost forex liquidity in the official market, gradually bringing an end to scarcity.
Although, a limitation is still set on the applicants buying forex from the authorised dealers, as they must have been approved by the CBN.
What the CBN forex circular contains
The circular covers the Inter-Bank trading and the FMDQ Trading System Onboarding.
On the Inter-Bank Trading
The apex bank said: “The Central Bank of Nigeria (CBN), in its efforts to further develop the Nigerian FX market, continues to embark on initiatives that serve to improve the FX market structure. Consequently, further to the CBN Circular FMD/DlR/ClR/GEN/08/007 dated April 21, 2017, on the Establishment of the Investors’ & Exporters’ (I&E) FX Window, the CBN hereby issues the following directives:
- Authorised Dealers may defease their excess foreign currency trading positions to other Authorised Dealers without seeking prior approval from the CBN.
- All inter-bank transactions shall be subject to a maximum spread of NI.00.
- Funds purchased by an Authorised Dealer from another Authorised Dealer, in the inter-bank market, shall not be held in position overnight by the buying Authorised Dealer or sold to another Authorised Dealer.
- Such Inter-bank purchases shall only be sold by the buying Authorised Dealer to its customers for Permitted/Eligible Transactions as outlined in the above-referenced Circular. All documentation requirements for Permitted Transactions shall apply.
- Authorised Dealers shall not exceed their respective Foreign Currency Trading Position Limit (FCTPL) without the approval of the CBN. Compliance with the FCTPL shall be strictly monitored by the CBN.
- All inter-bank trades – spot, forwards, futures, options and swaps – that have an impact on an Authorised Dealer’s FCTPL are expected to comply with rate reasonability standards.
- The CBN reserves the right to intervene, as a buyer or seller, as it deems fit in the inter-bank market.
- Authorised Dealers must report to the CBN, details (source and applications indicating the amount, counterparty, deal rate, etc.) of all inter-bank purchases/sales by 4 p.m. daily through the portal provided ([email protected]). Compliance is mandatory.
Regarding the on-boarding for the FMDQ Trading System
Authorised Dealers were advised to encourage their corporate clients to on-board the FMDQ-advised FX Trading System immediately, to avoid sanctions, foster the speedy migration of the activities of the I&E FX Window unto the FX Trading System and, in turn, ensure that the objective of deepening the market is achieved.
