The Central Bank of Nigeria (CBN) has introduced an Electronic Foreign Exchange Matching System (EFEMS) for Foreign Exchange (FX) transactions within the Nigerian Foreign Exchange Market (NFEM).
According to a circular with Ref No FMD/DIR/PUB/CIR/001/021 dated October 2, 2024 and titled ‘Introduction of the Electronic Foreign Exchange Matching System (EFEMS) in the Foreign Exchange Market’ issued by the CBN to authorized dealers, the new system is set for implementation from December 1, 2024,
The circular, signed by the apex bank’s Director of the Financial Market Department, Dr. Omolara Duke, indicated that that EFEMS was designed to improve governance and transparency in the FX market.
In addition, the EFEMS also expected to promote a market-driven exchange rate that will be more accessible to the public.
The CBN further clarified: “The introduction of EFEMS will enhance governance, transparency, and facilitate a market-driven exchange rate accessible to all.”
In addition, the circular stated that the system will undergo a two-week test run in November 2024, before its official launch.
It also reflected that once operational, all FX transactions in the interbank market would be conducted through the EFEMS, with transactions reflected in real time even as the implementation is expected to curb speculative activities, reduce market distortions, and provide the CBN with improved oversight capabilities for regulating the market effectively.
Based on the contents of the circular, the apex bank will publish real-time data on prices and buy/sell orders from the EFEMS, and in collaboration with the Financial Markets Dealers Association (FMDA), it will release the rules for operating the system.
Similarly, the Nigerian FX Code and revised Market Operating Guidelines will also offer guidance to market participants.
The circular further stated that all authorized dealers were required to ensure full compliance with the existing guidelines governing the Nigerian foreign exchange market and must complete all necessary documentation, training, and system integrations ahead of the December go-live date.
Experts believe that the latest initiative of the monetary authorities is development is anticipated to reshape the FX landscape in Nigeria, promoting a more transparent and efficient foreign exchange market.
