CBN CHANGES GEAR ON FX MARKET


After about six months of experimenting with foreign exchange allocation at fixed exchange rates the Central Bank Of Nigeria (CBN) will from Monday introduce a single inter bank foreign exchange market.

According to the long awaited guidelines for the new marker released a few hours ago the change of gear is to facilitate " a liquid, transparent foreign exchange (FX) market".

Under the guidelines the market will be purely inter bank but the CBN reserves the right in intervene to buy or sell at any time it deems necessary.

There will also be authorised FX primary dealers registered and designated to deal with the CBN on large trade sizes on a two way basis and they will also operate in the inter bank market alongside others banks.

At the market, maximum spread between bid and offer shall be determined be Through Thomson Reuters FX Trading system based on the order book.

Proceeds from investment capital in flow and outflows and from money transfers shall be purchased at the market by authorised dealers at inter bank rate.

The guidelines also have provision for Over the counter (OTC) futures trading with maximum limits being linked to shareholders fund of authorised dealers.

On paper, especially with the risk management products also to be introduced to support the market, it looks certain to be enroute full liberalisation of Nigeria's FX market.

But then, the danger ahead still remains supply. If supply is enough to keep the market going without the Naira going on endless search for a bottom, fine no problem.

Another danger remains future temptation to control what purchased FX is used for when more buyers opt to maximum their gains on FX bought with care for what is best for Nigeria's economic development and stride out of today's challenges.

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