In a move aimed at fostering transparency and curbing market distortions, the Central Bank of Nigeria (CBN) has announced the launch of an Electronic Foreign Exchange Matching System (EFEMS) set to take effect on December 1, 2024.
This system, designed to transform the country’s foreign exchange landscape, will undergo a two-week test run in November before becoming fully operational.
The EFEMS is poised to revolutionize foreign exchange transactions in the Nigerian interbank market by ensuring that all transactions are conducted electronically, with real-time reflections accessible to the public. According to a circular signed by the Director of the Financial Markets Department at the CBN, Omolara O. Duke, authorised dealers will be mandated to conduct all FX transactions through the new system, enhancing transparency and governance in the market.
“The Central Bank of Nigeria hereby announces the introduction of the Electronic Foreign Exchange Matching System for foreign exchange transactions in the Nigerian Foreign Exchange Market to be implemented no later than December 1, 2024. There will be a two-week test run in November 2024,” the circular stated.
The introduction of EFEMS is particularly timely, as the Nigerian economy faces ongoing challenges with currency instability and speculative trading. These issues have created significant volatility in the foreign exchange market, which the CBN hopes to address with the new electronic system. The EFEMS will minimize speculative activities, eliminate market distortions, and promote a market-driven exchange rate that is accessible and transparent to all stakeholders.
“With the implementation of the EFEMS, the CBN will publish real-time data on prices and buy/sell orders, offering the public and market participants greater visibility into exchange rate dynamics,” the circular added. “The collaboration with the Financial Markets Dealers Association will ensure that the rules guiding EFEMS are clearly defined, while the Nigerian FX Code and the revised Market Operating Guidelines will provide further guidance for market participants.”
The move is part of the CBN’s broader strategy to strengthen its regulatory oversight and ensure the smooth functioning of the Nigerian foreign exchange market. The EFEMS will empower the CBN with enhanced oversight capabilities and provide a more structured framework for monitoring market activities.
Ahead of the implementation deadline, the CBN has urged all authorised dealers to comply with existing regulations, complete the necessary documentation, and undergo required training to ensure seamless system integration. The bank’s ultimate objective is to establish a more transparent, efficient, and well-regulated forex market that better serves Nigeria’s economic interests.
With the introduction of EFEMS, the CBN reaffirms its commitment to a stable and transparent foreign exchange environment, which is expected to build investor confidence and drive long-term growth in the Nigerian financial markets.
