By Precious Momoh
The Central Bank of Nigeria (CBN) has announced a $100,000 minimum trade threshold for interbank foreign exchange transactions via the Electronic Foreign Exchange Matching System (EFEMS).
This directive, dated November 25, 2024, and signed by Dr. Omolara Duke, Director of the Financial Markets Department, aims to bolster transparency, efficiency, and compliance within Nigeria’s FX market.
In a statement released by the apex bank, it emphasized the introduction of Bloomberg’s BMatch platform as the official tool for managing these trades. This platform, scheduled to go live on December 2, 2024, is expected to streamline interbank FX trading and ensure strict adherence to CBN regulations.
New Guidelines for Forex Trading
As part of the directive, all interbank forex trades must be conducted through the EFEMS platform, with a minimum tradable amount set at $100,000. Transactions can only be increased in incremental clip sizes of $50,000, a structure designed to promote uniformity and reduce trading discrepancies.
The guidelines stipulate that:
- Participants must be authorized dealer banks licensed by the CBN.
- Trades must involve spot FX transactions between the Nigerian naira and the United States dollar.
- Transactions exceeding set credit and settlement limits will not be executed.
Trades completed via EFEMS are considered binding unless canceled by mutual agreement and approved by the CBN. “Participants must have adequate credit and settlement limits set for the CBN as its counterparty bank,” the statement added.
The EFEMS also features a provision for anonymity in transactions, with counterparty details only disclosed after trades are matched. This ensures enhanced security and integrity throughout the trading process.
To maintain market transparency and prevent malpractices, the CBN will closely monitor all transactions conducted on the EFEMS platform. The apex bank mandates participants to submit daily reports detailing trade volumes, settlement statuses, and counterparties involved in the transactions.
“Any violations of the EFEMS guidelines or related regulations will attract strict penalties, including the suspension or revocation of access rights,” the CBN warned.
Institutions wishing to join the EFEMS must first obtain prior approval from the CBN, execute agreements with the platform provider, and comply with prescribed credit and settlement limits. Withdrawal from the platform requires a 30-day notice and the resolution of all outstanding obligations.
The CBN stated that trades conducted outside EFEMS parameters or exceeding set limits must be reported promptly. Such transactions are to be logged into the FX blotter within 10 minutes of execution.
Streamlining FX Operations
By designating Bloomberg’s BMatch as the EFEMS platform, the CBN aims to significantly reduce counterparty risks and ensure seamless execution of forex trades. The platform will operate during business days between 9:00 AM and 4:00 PM West Africa Time.
The introduction of a $100,000 minimum trade value is part of the central bank’s broader efforts to stabilize Nigeria’s forex market and enhance operational efficiency. With this move, the CBN underscores its commitment to ensuring that Nigeria’s FX market adheres to international best practices.
Participants are also required to comply with the Nigerian Foreign Exchange Code and other relevant CBN regulations. This initiative is expected to foster greater confidence in the forex trading system while promoting transparency across all levels of operation.
As December 2 approaches, market participants and stakeholders are gearing up for the full implementation of these guidelines, signaling a new phase in Nigeria’s interbank forex market operations.
