CBN sets banks’ minimum trade on EFEMS at $100,000

… releases new guidelines for FX trading

Hope Moses-Ashike

The Central Bank of Nigeria (CBN), on Tuesday, issued comprehensive guidelines for the operations of the interbank foreign exchange (FX) trading system via the Electronic Foreign Exchange Matching System (EFEMS), pegging the minimum tradable amount at $100,000, with incremental clip sizes of US$50,000 to promote transparency and efficiency in the FX market.

Omolara Duke, the CBN’s director of the financial markets department, announced this in a circular sent to all banks on Tuesday. According to Duke, the EFEMS initiative is designed to ensure “transparent, fair, and efficient FX trading, minimise counterparty risks, and enforce compliance with CBN regulations.”

To facilitate interbank trading under this framework, the CBN also approved Bloomberg BMatch as the designated platform supporting EFEMS. All market participants are mandated to adhere strictly to the guidelines and any future amendments issued by the CBN.

The guidelines outline critical terms and roles, defining participants as institutions authorised by the CBN to engage in Nigeria’s interbank FX market. Authorised dealers, financial institutions licensed by the CBN will access the EFEMS platform with unique dealing codes assigned by Bloomberg Launch Pad.

The trading system will operate exclusively for spot FX transactions between the Nigerian Naira (NGN) and the United States Dollar (USD), with the possibility of introducing other currency pairs upon further CBN directives. Trades will be conducted between 9:00 AM and 4:00 PM West African Time on business days.

“All unmatched orders will be cleared at the market’s close and may be resubmitted the following business day,” the circular noted, noting that quotes on EFEMS would remain anonymous until matched. Matched trades, however, will reveal counterparty details for settlement purposes.

Market participants are required to set and maintain credit and settlement limits for their counterparties, including the CBN. Transactions exceeding these limits will not be executed. Participants must also comply with the Nigerian Foreign Exchange Code and other applicable CBN regulations.
The circular emphasised the importance of maintaining accountability, stating that “all trades consummated on EFEMS are binding, unless canceled by mutual agreement of both parties with written approval from the CBN.”

In cases of platform issues, the guidelines mandate that the system provider must offer real-time support. Alternative trading protocols will be activated if prolonged downtime occurs, ensuring market operations continue seamlessly.

Participants seeking to withdraw from EFEMS are required to notify the CBN in writing, providing a 30-day notice while ensuring all obligations are fulfilled.

The guidelines are seen as a step toward fostering stability and investor confidence in Nigeria’s FX market. A financial analyst familiar with the development commended the initiative, stating, “The introduction of a structured system like EFEMS brings greater transparency to the FX market, which is crucial for attracting foreign investments and stabilising the Naira.”

The CBN’s decision to peg the minimum tradable amount at $100,000 aims to promote meaningful trades and reduce market inefficiencies. It also reinforces the commitment of the apex bank to creating a robust and transparent financial ecosystem, the analyst said.

The EFEMS guidelines are expected to be a critical tool in addressing some of the challenges that have plagued Nigeria’s FX market, including irregularities in trade execution and counterparty risks. By setting clear rules, the CBN is positioning the market for enhanced efficiency and trust.