• Saturday, June 22, 2024
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CBN pushes for FX market transparency to drive confidence



Nigeria’s naira fell slightly yesterday after the central bank’s foreign-exchange trading platform called on banks to disclose all their currency transactions, including those done with customers that weren’t previously booked.

This follows indications the regulator is easing its grip on the currency as it tries to attract inflows.

Banks should “update all trades irrespective of the exchange rate,” the chief executive officer of Lagos-based FMDQ OTC Securities Exchange, Bola Onadele, said in an e-mail sent to dealers on July 21. “The Central Bank of Nigeria is very interested in credible price formation for the spot foreign-exchange market. It is also imperative for price discovery and liquidity assessment of our market, which are key to activate foreign portfolio investment flows.”


Banks should publish all their so-called “off-line trades” on the trading system “within 30 minutes of execution of such transactions,” according to a separate e-mail sent to dealers by FMDQ on the same day.

The naira fell 3.9 percent to 305.25 on July 22, the day after Onadele’s e-mail. It dropped another 1.6 percent to 310 by 4:47 p.m. in Lagos on Monday.


Nigeria has struggled to attract foreign money into its bond and equity markets since devaluing the naira by 30 percent onJune 20, ending a 16-month peg of 197-199 per dollar, with investors concerned the central bank was still controlling the exchange rate. FMDQ started operations in 2013 and its chairman is Sarah Alade, deputy governor of the CBN.


The central bank last week eased a ban on sales of foreign exchange to non-bank money changers, in a move meant to help align the naira’s official and black markets rates. Banks are now allowed to sell hard currency from remittances to bureaux de change operators, who trade at the black market rate, the central bank said in a statement on July 22.

The black market rate, which foreign investors see as a gauge of the naira’s fair value, was little changed at 378 per dollar on Monday, around 21 percent weaker than the official rate.