By Elizabeth Adegbesan

The Central Bank of Nigeria (CBN) has announced the introduction of the Electronic Foreign Exchange Matching System (EFEMS) for Foreign Exchange (FX) transactions within the Nigerian Foreign Exchange Market (NFEM).

This new system is set to be implemented by December 1, 2024, according to a circular released by the CBN to authorized dealers.

The circular, signed by Dr. Omolara Duke, Director of the Financial Market Department at the CBN, explains that EFEMS is designed to improve governance and transparency in the FX market. It is also expected to promote a market-driven exchange rate that will be more accessible to the public.

According to the CBN, “the introduction of EFEMS will enhance governance, transparency, and facilitate a market-driven exchange rate accessible to all.” Additionally, the system will undergo a two-week test run in November 2024, before its official launch.

Once operational, all FX transactions in the interbank market will be conducted through the EFEMS, with transactions reflected in real time. The system is expected to curb speculative activities, reduce market distortions, and provide the CBN with improved oversight capabilities for regulating the market effectively.

The CBN will publish real-time data on prices and buy/sell orders from the EFEMS. Additionally, in collaboration with the Financial Markets Dealers Association (FMDA), the CBN will release the rules for operating the system. The Nigerian FX Code and revised Market Operating Guidelines will also offer guidance to market participants.

Authorized dealers are required to ensure full compliance with the existing guidelines governing the Nigerian foreign exchange market and must complete all necessary documentation, training, and system integrations ahead of the December go-live date.

This development is anticipated to reshape the FX landscape in Nigeria, promoting a more transparent and efficient foreign exchange market.