By Milcah Tanimu
The Central Bank of Nigeria (CBN) will implement an Electronic Foreign Exchange Matching System (EFEMS) for FX transactions starting December 1, 2024. Omolara Duke, the Director of the CBN’s Financial Market Department, made the announcement in a recent circular.
A two-week test phase will occur in November. During this time, authorized dealers must conduct foreign exchange transactions through this approved electronic system. This will ensure that all transactions reflect immediately.
The EFEMS aims to improve governance and increase transparency. It will also establish market-driven exchange rates, reducing speculation and market distortions. The CBN will provide real-time pricing data and collaborate with the Financial Markets Dealers Association (FMDA) to develop operational rules for the EFEMS.
In the CBN’s statement, it was noted, “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 order data to support market participants.
This initiative represents a key reform under Yemi Cardoso’s leadership. It aims to stabilize the forex market and improve operational efficiency. By digitizing forex transactions, the CBN seeks to address inefficiencies and speculative trading that have historically affected the market.
Additionally, this move follows the liberalization of the forex market in June 2023. The goal was to reduce arbitrage and eliminate market distortions. The CBN has also revised guidelines for Bureau De Change (BDC) operations. This includes increasing the capital requirement for tier-1 BDCs from N35 million to N2 billion.
With the EFEMS, the CBN aims to enhance regulatory oversight and manage volatility. This will ensure a more stable interbank foreign exchange market in Nigeria.
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