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See Details of the New FOREX Management Guidelines




CBN Governor, Godwin Emefiele

CBN Governor, Godwin Emefiele

The Central Bank of Nigeria (CBN) has unveiled new guidelines in the management of Foreign Exchange (FX) which will be determined by the market and primary dealers.

The CBN Governor, Godwin Emefiele, made the announcement on Wednesday in Abuja at a briefing to unveil the Framework for Re-introduction of Managed Float Exchange Rate System.

He said the re-introduction of a flexible inter-bank exchange rate market will restore the automatic adjustment mechanism of the exchange rate.

He said the workings of the market will then be consistent with the Bank’s objectives of enhancing efficiency and facilitating a liquid and transparent Foreign Exchange Market.

Emefiele said that the primary dealers would be chosen from existing FX dealers based on the volume of foreign exchange transactions they have handled before and must have a minimum capital of $10 million.

He said the level of liquidity, the extent to which those dealers have complied with CBN’s regulations in the past, their level of preparedness in terms of being able to provide all the soft and hardware needed to operate would also be conditions to determine their qualification.

“The market shall operate as a single market structure through the inter-bank and autonomous window. The Exchange Rate will be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book.

The CBN will participate in the Market through periodic interventions to either buy or sell FX as the need arises.

To improve the dynamics of the market, we will introduce Forex Primary Dealers (FXPD) who would be registered by the CBN to deal directly with the Bank for large trade sizes on a two-way quotes basis.

These Primary Dealers shall operate with other dealers in the Inter-bank market, amongst other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) Guidelines, which would also be released immediately,” he said.

Emefiele said the 41 items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN Circular remained inadmissible in the Nigerian Forex market.

He also said the CBN had introduced a non-deliverable Over The Counter (OTC) Naira-settled Futures with daily rates on the CBN-approved Trading and Reporting System.

He said this was an entirely new product in the Nigerian Foreign Exchange Market, which would help moderate volatility in the exchange rate by moving non-urgent FX demand from the Spot to the Futures market.

“This is an innovation which we have introduced to moderate volatility in the FX market. It is a situation where it makes it easy for you as a businessman to plan your business at the rate you want to do your business.

You do not have to fear that what is happening to crude prices will affect the rate you source your dollar in say three months when you need it.

So with this new policy you can decide that I have pegged the price of the FX I need at `x’ and you log it to the futures rate with the primary dealers.

If in the next three months, the rate you agreed in locking your future deal is N260 to a dollar and the market is doing N270 the CBN will make up for the N10 gap.

So this will ensure that you do not lose money by waiting three months to procure your FX. What that does is that we want to see how this shifts demand from spot to the time when you truly need it.

This will discourage people that need dollar in the next three to nine month to stop asking for dollar on spot, thereby putting pressure on the demand for the dollar at the spot market today,” he said.

Emefiele said the new policy became necessary to deal with the effect of the drop in international oil prices and global growth slowdown which had impacted negatively on the country’s economy.

“In view of these headwinds, the CBN witnessed a significant decline in our Foreign Exchange Reserves from about 42.8 billion dollars in January 2014 to about 26.7 billion dollars as of June 10, 2016.

In terms of inflows, the Bank’s foreign exchange earnings have fallen from about 3.2 billion dollars monthly to current levels of below a billion dollars per month.

Despite these outcomes the demand for foreign exchange has risen significantly. For example, in 2005 when we had oil prices at about 50 dollars per barrel for an extended period of time our average import bill was N148.3 billion per month. In stark contrast, our average import bill for 2015 was about N197.6 billion per month.

Unfortunately, the interplay between reduced FX supply and rising FX demand accounted for a substantial reduction in our foreign exchange reserves,” he said.

Emefiele said that selected FX Primary Dealers would be notified by Friday, June 17. All other non-Primary Dealers would remain valid and eligible to participate in the market.

He said the Inter-bank trading under the new guidelines would begin on June 20 while the tenors and rates for the OTC Naira-settled FX Futures would be announced on June 27.

He reiterated the apex bank commitment to make the market as transparent, liquid, and efficient as possible.

The News Agency of Nigeria (NAN) was established by the Federal Government of Nigeria in May 1976 to gather and distribute news on Nigeria and cover events of interest to Nigeria at the international level for the benefit of the Nigerian Media and the Public.


  1. Mr. Egghead

    June 15, 2016 at 10:01 pm

    After Buhari has wrecked Nigeria with his Papa Ajasco economic ideas, he finally allows the right thing to be done.
    2019, where at thou?

    • FasholasLover

      June 15, 2016 at 10:20 pm

      Lol, you’ll be amazed at the number of people who are ready to defend Buhari and his economic policies with their last breath, even when they are suffering. While some people are in financial ruin, some are just coming into money curtesy of the APC. 2019 will surely be interesting. Buhari is too old to dare desire to come back. I don’t think his party will dare field him. The man and his present team are lacking in cognitive skills.

    • molarah

      June 15, 2016 at 10:23 pm

      2019 is actually here, and the only different front-line man is Atiku Ababakar

      Let’s stop being ridiculous with these calls for 2019 when we are not even making efforts to push forward new and more competent candidates.

      The new regime sound fairly okay, let’s hope execution will run smoothly.

    • molarah

      June 15, 2016 at 10:24 pm

      *the new FX regime sounds

  2. Rosey

    June 15, 2016 at 10:07 pm

    Simple question…are they devalueing naira?

    • CovertNigerian

      June 15, 2016 at 11:00 pm

      The point of this announcement is that the CBN is getting rid of the Naira-to-Dollar peg. Market forces will determine the Naira’s value and the result will almost certainly be a devaluation. Sadly, it is pretty inevitable and the fact that it has taken this long for the CBN to allow it happen has done our economy more harm than good.

  3. Love

    June 15, 2016 at 10:25 pm

    Can someone Pls explain in a lay man’s language

  4. NL Comment

    June 15, 2016 at 10:41 pm

    In summary CBN has ceased interference with exchange rate. Consequently the exchange rates will be based strictly on demand and availability. I don’t see Naira losing much value as it will remain within the 300 to 400 vicinity against the US Dollar.

    What is simply new is that they won’t be anything like black market or parallel market and cbn official rate. The cbn official rate was 199 naira to a dollar which is fixed and not market determined by supply and demand. what that meant is that some get to by dollars at 199 while does who can’t buy it 350 from BDC. With this new policy, no more such, one single exchange rate, one single market.

  5. NL Comment

    June 15, 2016 at 10:44 pm

    Part 2

    What the government has done is to deregulate the foreign exchange market. In a layman’s term, it means removing government determination of foreign exchange rates. Dollars that was previously fixed at N197/199 would now be traded in the interbank market, and therefore exchange rates determined between the various banks.

    If you take a school fees payment request to bank A for instance, the bank would give you a rate after getting a quoting from a seller (which can be other banks or themselves, if they have stock of fx) and this becomes the rate you would buy the fx for your school fees payment. if you are unhappy with what bank A quoted, you can approach bank B and attempt to get a cheaper quote

    Banks can now source for foreign exchange from various sources, including non oil exporters and purchase at the rate they (the banks) are willing to pay, no longer the rate the government said they must! But this isn’t really a favourable factor for exporters if interbank fx rates (which is the rate the banks would buy the export proceeds) are lower than what the exporters can get from the black market. The best case would have been to allow exporters access to their inflows and let them decide whomever they wish to sell to, whether it is the banks or mallams on the street!! This is what would boost supply.

    However you would find that the interbank rates in foreign exchange would likely continue to trail those of the parallel Market rates. The trick is if the banks have a deep market/stock to meet all the request from customers, which would mean there would be no incentive to patronise the parallel market for fx buyers. Thi is because the bank’s rate would be lower than parallel market rates. I do not forsee this scenario likely as our foreign reserve remains low, which is the buffer for CBN interventions. All other sources are already known and utlilized at present so where would the higher fx supply come from?

    • Saint tracy

      June 16, 2016 at 9:19 am

      Thank you very much. We need more layman speaking people like you

  6. NL Comment

    June 15, 2016 at 10:45 pm

    Other BN Economics graduates, oya over to you :p

    • BBB

      June 16, 2016 at 9:13 am


      Thank you. You have done a job of simplifying the “jargon”.

  7. Timi

    June 15, 2016 at 10:53 pm

    This is like saying that naira should fight in the ring without any help just referee. Naira will lose for a long time before it picks up. Allowing true market value means that the government is truly ready for the world to see the Nigerian economy at its face value. This means 360 Naira to 1 Dollar and the worst is yet to come. I believe we would cross 400 Naira to 1 Dollar soon before the market corrects itself hopefully

    This could play out like the mobile phone liberalisation of 2000 that had very high initial prices until Glo came with great competition.
    IF this new FULL float policy is scrupulously implemented, even for government transactions WITHOUT letting some privileged people get forex at lower CBN rates for round-tripping, then in due course we will see more inflow of forex into our economy that will lead to lower rates. In the meantime, EXPORTS should increase while imports REDUCE and local production grows for more EMPLOYMENT. However all these better better things won’t happen if Buhari’s government and the CBN keep giving forex to some people who will sell it CORRUPTLY for massive gains having done absolutely NOTHING to add value to the nation.


      June 17, 2016 at 12:12 am

      Thanks Timi! I was about to post that allowing the naira to fight for its rightful place against the dollar is a lost battle when your imports exceed exports by far, i.e., you are a consumer society. I pray for my people left in the country. Sorry.

  8. kkay

    June 16, 2016 at 9:25 am

    @ NL Comment, thanks for the enlightenment.
    Let’s await implementation and effects on the market.

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