The new flexible FOREX policy framework was announced yesterday by the Central Bank ofNigeria. The guidelines were released following a decision made by Nigeria’s apex bank to ditchthe pegged rate system, which many analysts say exarcebated the country’s economic crisis.
Interestingly, the changes made to the central bank’s FOREX policy went further than wasexpected. Exchange rates will now be determined by market forces, with a single flexibleexchange rate market structure.
Interventions may however occur when the central bank deems itnecessary. Interbank trading under the new guidelines is to begin on Monday, June 20.In addition, the CBN plans to deal with a maximum of about 10 Foreign Exchange PrimaryDealers (FXPD) who would operate with other FOREX dealers in the interbank markets. TheCBN governor, Dr. Godwin Emefiele, referred enquirers to the CBN’s website for details of therequirements for primary FOREX dealership.
Non primary dealers, whose status implies that theywill trade with lower sums than the primary dealers, will also participate in the market.Meanwhile, there are reports that Nigeria’s currency dealers, under the banner of the FinancialMarket Dealers Association (FMDA) will meet today to determine trading spreads for thecurrency; according to CNBC, the possible range within which dollar-naira trading will take placestarting Monday, is between the fixed rate of N197, and the black market rate of about N370.
The announcement by the CBN appears to have excited investors, as the All Share Index of theNigerian Stock Exchange (NSE) rose more than 3 percent yesterday, with market capitalisation adding N279 billion to finish higher at N9.579 trillion. Full details of the guidelines for the new FOREX policy can be downloaded from the CBN‘
