WED, JUNE 14 2023-theGBJournal |The Central bank of Nigeria (CBN) today announced sweeping operational changes to the foreign exchange market, in what is generally viewed as a new pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.
Seen as a bold move, the apex bank effectively collapsed all segments of the FX market into the Investors and Exporters (I&E) Window but directed applicants for medicals, school fees, BTA/PTA, and SMEs to continue sourcing their FX through the deposit money banks.
It reintroduced the ”Willing Buyer, ‘Winning Seller’ model at the I&E Window saying that operations in the window shall be guided by the extant circular on the establishment of the window on 21st April, 2017.
”The operational rate for all government-related transactions shall be the weighted average rate of the preceding day’s executed transactions at the I&E Window, calculated to two decimal places.”
The CBN also ordered proscription of trading limits on oversold FX positions to hedge short positions with OTC futures noting that limits on overbought positions shall be zero.
The Order Book and order-based two way quotes is also reintroduced, with bid-ask spread of N1. It directed that all transactions shall be cleared by the Central Counter Party (CCP).
The apex bank equally ordered the cessation of the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, with effect from June 2023.
Analysts at Centre for the Promotion of Private Enterprise [CPPE] say with these changes, the component of forex demand driven by arbitrage, rent seekers, speculators and other economic parasites would fizzle out, thus restoring stability to the forex market.
”It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It would minimize discretion and arbitrage in the foreign exchange allocation mechanism,” CPPE said in statement to theGBJournal Wednesday.
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