The Central Bank of Nigeria (CBN) has announced new guidelines for interbank foreign exchange trading through the Electronic Foreign Exchange Matching System (EFEMS), establishing a minimum trade value of $100,000.
Dated November 25, 2024, and signed by Dr. Omolara Duke, CBN’s Director of the Financial Markets Department, the directive aims to enhance transparency, efficiency, and regulatory compliance within Nigeria’s foreign exchange market.
According to the guidelines released on Tuesday, the EFEMS is designed to streamline interbank FX trading, mitigate counterparty risks, and ensure adherence to CBN regulations. Bloomberg’s BMatch has been designated as the official order-matching platform for these transactions, with trading hours set from 9:00 AM to 4:00 PM West Africa Time on business days.
READ ALSO: CBN Commits to Fighting Inflation, Will Use Every Tool Available- Cardoso
A key feature of the new guidelines is the enforcement of a $100,000 minimum tradable amount, with incremental clip sizes of $50,000. The EFEMS will initially focus on spot FX transactions involving the Nigerian naira and the United States dollar, although the CBN retains the discretion to introduce additional currency pairs as necessary.
The guidelines state, “All trades consummated on EFEMS are binding unless canceled by mutual agreement of both parties with written approval from the CBN.” Participants must establish credit and settlement limits for other counterparties, with transactions exceeding these limits not being executed. Additionally, adequate credit and settlement limits must be set for the CBN as the counterparty bank.
Participation in the EFEMS is restricted to authorized dealer banks licensed by the CBN, while other institutions wishing to join must obtain prior approval. Participants are required to execute agreements with the CBN-approved platform provider, maintain accurate profiles, and operate within established credit and settlement limits.
Withdrawal from the platform requires a 30-day notice and resolution of any outstanding obligations. Trades conducted via the platform will remain anonymous until matched, with counterparty details disclosed only upon transaction completion, in accordance with settlement protocols.
Transactions that exceed set limits or fall outside EFEMS parameters must be reported promptly and logged onto the FX blotter within 10 minutes. The CBN emphasized its commitment to closely monitoring all transactions on EFEMS to uphold market integrity and transparency.
Participants are also required to submit daily reports detailing trade volumes, settlement statuses, and counterparties. The CBN reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements. Violations of the EFEMS guidelines or related regulations will incur strict penalties, including the suspension or revocation of access rights.
In a separate announcement on Tuesday, the CBN confirmed that the Bloomberg BMatch system will officially launch as the EFEMS for foreign exchange trading on December 2, 2024. All authorized dealers and banks in the interbank FX market are mandated to utilize the Bloomberg BMatch system for their trading activities.
The central bank emphasized that the system aims to ensure uniformity and seamless trading among market participants while enabling effective monitoring of market performance and data management. Banks are encouraged to collaborate with Bloomberg representatives to expedite the onboarding process and promptly address any technical or operational issues.