The Central Bank of Nigeria (CBN) has banned the negotiation of exchange rates with customers outside of the foreign exchange market.
It also directed that all customer transactions must be concluded with an entity duly licensed to participate in the foreign exchange market (subject to the provisions of the license category).
Also, bureaux de change (BDCs) operators are now permitted to buy foreign exchange from authorized dealers to meet their customer needs, subject to the aggregate monthly cap stipulated by the Central Bank of Nigeria (CBN).
In a circular, ‘FMD/DIR/CON/OGC/040/0012’ signed by the Director, Financial Markets Department of the CBN, Dr Omolara Omotunde Duke, the CBN said that the permission extends to BDCs that are licensed under the revised guidelines with reference number: ‘FPRD/DIR/PUB/CIR/002/010 issued on May 22, 2024.
The circular added that all foreign exchange transactions consummated with authorized dealers, BDC operators and international money transfer operators (IMTOs) are strictly subject to the terms of the respective licenses.
The apex bank urged all market participants to adhere to the highest code of ethics and professional conduct in all their dealings in the FX market in line with the Nigerian FX Code.
It added: “All trade-backed (visible and invisible) transactions as defined in the FX Manual are eligible to participate in the market, subject to meeting all regulatory requirements as applicable. All documentary requirements for eligible transactions must be verified by the Authorised Dealers before transactions are settled and adequate records must be maintained for audit purposes.”
The apex said the pricing of foreign exchange transactions in the NFEM would be undertaken on the Electronic Foreign Exchange Matching System (EFEMS).
“FX market statistics, including the daily transactional rates of all qualifying transactions on NFEM will be publicly available to guide market participants on the CBN website. All customer transactions conducted outside the EFEMS shall be guided by the prevailing NFEM rate at the time of execution.
“Authorised dealers are required to adopt a transparent pricing framework for customer foreign exchange transactions as described in the Nigeria FX Code and may be requested by the CBN to provide information on their pricing methodology,” it explained.
The CBN said trading of foreign exchange in the interbank market is permitted between authorized dealers subject to set credit limits as presented in the new titled ‘Implementation of the Bloomberg BMATCH for Foreign Exchange Trading’ referenced MD/DIR/CON/OGC/038/150 dated November 25, 2024.
It disclosed that market makers would be designated in the interbank market required to mandatorily provide daily two-way quotes in standard amounts and spreads.
All interbank transactions are equally expected to be concluded on the EFEMS for full transparency, and in line with the EFEMS rules and the Nigerian FX Code as published by the CBN.
The circular said all foreign exchange transactions completed by authorized dealers must be recorded on a processing system and reported to CBN within 10 minutes of the transaction, saying, “This includes all transactions completed with system participants on the EFEMS, trades concluded with market counterparties on telephone and/or chat-based platforms, and customer transactions concluded through other acceptable channels. The details of all foreign exchange transactions concluded by Commercial, Merchant, and Non-Interest-Bearing banks are required to be reported on a real-time basis to CBN via APIs to the FXBRS system for effective monitoring of market activities.”
In line with the conditions of their licenses, CBN said BDC operators must submit mandatory reports of all their activities through the relevant portal to the CBN daily while adoption of technology platforms for the submission of real-time reports to CBN is also encouraged.
The circular insisted that the CBN will remain the primary custodian of all transaction data in the foreign exchange market and will publish reliable market data on its website and that all EFEMS platforms are required to publish live market data to the public during market trading hours.
It added: “The CBN shall partner with market infrastructure providers to ensure timely and accurate dissemination of market data to the public. These guidelines shall serve as a guide to market participants on the regulatory framework governing foreign exchange market activities and will take precedence over any existing guidelines.
