The Central Bank of Nigeria (CBN) has announced the introduction of the Electronic Foreign Exchange Matching System (EFEMS) for Foreign Exchange (FX) transactions within the Nigerian Foreign Exchange Market (NFEM).
The new system is scheduled to begin from December 1, 2024.
The apex bank’s Director of Financial Market department, Omolara Duke disclosed this in a circular stating that there will be a two-week test to be conducted in November.
According to the CBN, authorized dealers must conduct all foreign exchange transactions through the CBN-approved system, with immediate transaction reflection.
The statement explained that the system will improve governance, transparency, and market-driven exchange rates, reducing speculation and market distortions.
Furthermore, the CBN noted that it will release real-time prices and collaborate with FMDA to establish rules for EFEMS operations.
The statement reads, “The Central Bank of Nigeria (CBN) hereby announces the introduction of the Electronic Foreign Exchange Matching System (EFEMS), for Foreign Exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM) to be implemented no later than December 01, 2024. There will be a 2-weeks test run in the month of November 2024.”
“Authorised Dealers would subsequently conduct all foreign exchange transactions in the interbank FX market on the Electronic Foreign Exchange Matching System approved by the CBN where transactions will be reflected immediately.”
“The CBN will publish real time prices and buy/sell orders data from the system, and in collaboration with the Financial Markets Dealers Association (FMDA), publish the rules for the EFEMS. The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also provide guidance to market participants.”
The move by the CBN to digitise forex transaction is part of reforms the Yemi Cardoso led apex bank has introduced to bring stability to the forex market and ensure better systems.
Traditional systems faced inefficiencies, speculative trading, and limited transparency, contributing to market distortions. EFEMS is designed to enhance governance, transparency, and a market-driven exchange rate.
By mandating its use, the CBN aims to tighten its regulatory oversight while addressing issues like speculation and volatility, thereby ensuring better management of the interbank foreign exchange market in Nigeria.
Following the liberalisation of the forex market in June 2023, the apex has been working to reduce and eliminate arbitrage and every form of market distortions that has characterised the foreign exchange market in Nigeria. Among these are the revised guidelines for Bureau De Change (BDC) operations which increase the capital requirement from N35 million for tier-1 BDCs to N2 billion and others.
