The Central Bank of Nigeria (CBN) has announced the launch of an Electronic Foreign Exchange Matching System (EFEMS) for foreign exchange transactions in the Nigerian FX market, set to go live on December 1, 2024. Omolara Duke, the Director of the Financial Market department, revealed this in a circular indicating that a two-week testing phase will occur in November.
Authorized dealers will be required to conduct all foreign exchange transactions through this CBN-approved system, ensuring immediate transaction reflection. The CBN emphasized that the EFEMS aims to improve governance, transparency, and market-driven exchange rates while reducing speculation and market distortions.
According to the announcement, the CBN will publish real-time prices and collaborate with the Financial Markets Dealers Association (FMDA) to establish operational rules for the EFEMS. The Nigerian FX Code and revised Market Operating Guidelines will also guide market participants.
This initiative is part of a broader set of reforms introduced by the CBN under the leadership of Yemi Cardoso, aimed at stabilizing the forex market and enhancing efficiency. Traditional forex systems have faced challenges such as inefficiencies, speculative trading, and limited transparency, contributing to market distortions. By mandating the use of the EFEMS, the CBN seeks to tighten regulatory oversight, mitigate speculation and volatility, and improve the management of the interbank foreign exchange market.
Since the liberalization of the forex market in June 2023, the CBN has been working to eliminate arbitrage and various forms of market distortions, including revised guidelines for Bureau De Change (BDC) operations that raise capital requirements from N35 million for tier-1 BDCs to N2 billion.
