CBN Resolves To Clear All Backlog of Forex Demand In The Country

forex, CBNThe Central Bank of Nigeria has resolved to clear all the backlog of forex demand of about 5 billion dollars in the country through spot and forward settlements.

According to a statement released by the Acting Director, Corporate Communications of the Central Bank, Mr Issac Okoroafor, the move is to engender confidence, ensure credible price formation and sustain the integrity of the Nigerian inter-bank FX market.

This comes as the new flexible forex trading begins on Monday.

The Central Bank of Nigeria (CBN) had released the highlights of the much awaited flexible foreign exchange market policy on Wednesday, June 15, weeks after the Monetary Policy Committee announced the introduction of the policy.

After its meeting of May 24, the CBN said the policy would allow the bank retain a small portion of foreign exchange for critical transactions.

Key notes released stated that the market would operate as a single market structure via the interbank market and authorised dealers and that it would be purely an exchange rate market managed via Thompson Reuters platform.

Part of the key notes is that the CBN would participate via periodic intervention and would introduce primary dealers that deal with the CBN on a two way quote basis.

The primary dealers are also expected to deal with other players in the interbank market.

Interbank Trading Of Foreign Exchange Expected To Begin In Nigeria

forexInterbank trading of foreign exchange is expected to begin on Monday in Nigeria, as contained in the highlights of the new flexible foreign exchange market policy released by the Central Bank.

Tenors and rates for Over The Counter (OTC) settled forex feature is also expected to be announced later in the day by the apex bank.

Highlights Of The Policy 

The Central Bank of Nigeria (CBN) released the highlights of the much awaited flexible foreign exchange market policy on Wednesday, weeks after the Monetary Policy Committee announced the introduction of the policy.

After its meeting of May 24, the CBN said the policy would allow the bank retain a small portion of foreign exchange for critical transactions.

Key notes released stated that the market would operate as a single market structure via the interbank market and authorised dealers and that it would be purely an exchange rate market managed via Thompson Reuters platform.

Part of the key notes is that the CBN would participate via periodic intervention and would introduce primary dealers that deal with the CBN on a two way quote basis.

The primary dealers are also expected to deal with other players in the interbank market.

Other aspects of the key notes are that there shall be no pre-determined spreads on forex transactions and all forex purchases shall be transferable while 41 items shall remain inadmissible in the forex market for forex transactions.

The CBN will also offer long term forex futures and sales of forex forwards for end users must be trade-backed.

The non-deliverable OTC forex settled trades will help moderate volatility. The OTC settled forex feature shall be on non-standardised amounts, the apex bank said.

Another aspect of the key notes states that proceeds of forex shall be purchased by authorised dealers at the daily interbank rates.

The new police which the CBN said was a market-driven trading system, is expected to end the central bank’s 16 month fixed exchange rate policy.

After the highlights were released, Nigeria’s capital market made remarkable gains, with most stocks appreciating in price.

No Need To Panic

One of the leading global rating agencies, Fitch Ratings had welcomed the decision of the apex bank, saying that the shift to a more flexible foreign-exchange regime could aid Nigeria to adjust to lower oil prices and support growth.

It however, warned that the implementation of the new forex policy may present challenges if not properly managed.

Fitch explained that establishing the new framework’s credibility would be key to its effectiveness in attracting portfolio flows and Foreign Direct Investments (FDIs) to make up for lower oil export receipts.

Meanwhile, the CBN Governor, Godwin Emefiele, has reiterated that there was no need for businesses and investors to panic over the new forex policy, saying it will help address the imbalance in the economy.

CBN Adds To Forex Prohibition List             

forexThe Central Bank of Nigeria (CBN) has added overseas school fees and medical tourism to its list of items prohibited from the interbank foreign exchange window.

This brings the items on the forex prohibition list to 43 in number.

On Thursday, Governor Adams Oshiomhole of Edo State recommended the addition of the two items to the list.

He was speaking at the Cable Newspaper colloquium in Lagos.

In reaction to the development, the naira has hit a record low of 325 to the dollar while the pound trades for 450.

This follows shortage of foreign exchange caused by importers scrambling for the greenback to meet their obligations overseas.

While traders expect the naira to weaken further in coming days, the CBN official exchange rate has remain unchanged at 197 naira to the dollar.

LCCI Demands Comprehensive Framework For Forex Market

LCCIThe Lagos Chamber Of Commerce and Industry (LCCI) has asked the Central Bank to come up with a comprehensive framework for the foreign exchange market. 

In a statement released by the chamber on Sunday, the LCCI noted that the restrictions placed on 41 items in the forex market were no longer required, especially at a time when the regulator’s official forex window has been closed.

The LCCI explained that the normalisation of the foreign exchange market is very crucial at this period, as the impact is being felt across all levels of investments in the country.

The chamber suggested that sources of foreign exchange including diaspora remittances, export proceeds, forex sales by foreign investors and multinational companies as well as forex sales by donor agencies should be allowed to be freely traded in the autonomous market.

Naira Hits N206/$, CBN, Bankers Meet

NairaElectronic trading in the naira was halted for the second day on Thursday as the local currency was quoted at a new record low of 206.60 Naira to the dollar.

This would be amongst the issues discussed by the Central Bank of Nigeria Governor, Mr Godwin Emefiele, as he meets with the bankers’ committee in the nation’s commercial centre, Lagos.

Apart from its renewed effort to stabilise the naira, the bankers committee might consider issues around a possible devaluation of the local currency ahead the Monetary Policy Committee meeting next month, depleting foreign exchange reserves and the effect of polls shift on the financial market.

He was also expected to visit the Nigerian equities market after the meeting.