Nigeria’s central bank has announced the introduction of an Electronic Foreign Exchange Matching System (EFEMS), for Foreign Exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM).
This new system will replace the nearly decade-old over-the-counter trading system, to enhance transparency and eliminate market distortions.
According to a statement issued by Omolara Duke, the Director, Financial Markets Department, the EFEMS will be implemented by Dec.1. “This development is expected to reduce speculative activities, eliminate market distortions and give the CBN improved oversight,” the statement read.
There would be a two-week test run in November, and the apex bank would publish real-time prices when the EFEMS starts becoming operational.
The transition to the Electronic Foreign Exchange Matching System (EFEMS) comes against the backdrop of currency controls implemented by Nigeria in 2017, during the peak of its economic crisis, Reuters reported.
At that time, the Central Bank of Nigeria (CBN) introduced multiple exchange rate regimes, including an over-the-counter trading system that obscured the underlying weaknesses of the naira.
Under the old system, lenders could only trade buy or sell orders directly from customers, limiting dollar supply and causing harm to the economy. With the introduction of the new system, the Central Bank of Nigeria (CBN) has announced plans to publish real-time prices and data on buy/sell orders.
Alongside this transition, the CBN also issued updated guidelines for participants in the foreign exchange market.
