NEW FOREX POLICY IN NIGERIA : ALL YOU NEED TO KNOW

Posted on Author S. Olawale

NEW FOREX POLICY IN NIGERIA: ALL YOU NEED TO KNOW

The Federal Government of Nigeria through it finance arm unveiled the new forex policy in Nigeria. This policy according to some quarters if implemented will bring about strengthening of the Naira as well as helping our now-weak economy. This article would highlight all you should know about this new forex policy unveiled by the Governor of Central Bank, Godwin Emefiele. Before that, let take a brief overview of the new forex policy in Nigeria .

The long and much-awaited new forex policy in Nigeria was unveiled on Jun 15, 2016 by the Governor of Central Bank of Nigeria and would among other things remove the control of the Naira. Before this, the Naira had always been controlled by CBN and they determine it value but now, it would be free from the Central Bank’s control and would now be dependent on the happenings in the market. This will not be free in it entirety as the Federal Government from time to time would be interfering depending on the happenings.

The Nigeria new forex policy effectively removes controls on the naira and is expected to among other things increase the supply of dollars and help the Nigerian weak economy. According to the Governor while making the announcement, CBN will operate a single trading window consisting of 10 primary traders each having a minimum volume of $10 million. These 10 primary traders would be appointed by the bank. In his words, Mr. Godwin said; “We are optimistic that the steps we have taken today will further deepen the market and help get foreign exchange into the market.” He also added that “I will say to Nigerians be calm, there is no need to worry as everything is well.”

ALL YOU NEED TO KNOW ABOUT THE NEW NIGERIA FOREX POLICY

  • The Foreign Exchange market will operate as a single market structure through the inter-bank window.
  • Central Bank of Nigeria will participate in the Market by periodically intervening to either buy or sell forex as the need arises. 
  • The Foreign Exchange Rate will be purely market-driven using the Thomson-Reuters Order Matching System with the Conversational Dealing Book. 
  • To improve the dynamics of the market, the Central Bank of Nigeria will introduce 10 FX Primary Dealers who would be registered by the Central Bank to deal directly with the Bank for large trade sizes on a 2 way quotes basis. 
  • The 10 selected Primary Dealers shall operate with other dealers in the Inter-bank market strictly as contained in the Foreign Exchange Primary Dealers Guidelines. 
  • According to the new forex policy in Nigeria , there shall be no predetermined spread on Foreign Exchange spot transactions executed through the Central Bank intervention with Primary Dealers while all forex Spot purchased by the authorized Dealers are transferable in the inter-bank forex Market.
  • The Central Bank may also offer long-tenored Forex Forwards of 6 to 12 months or any tenor to the authorized Dealers to enhance liquidity in the market. 
  • According to the new policy, the sales of Forex Forwards by Authorized Dealers to end-users must be trade-backed with no predetermined spreads. 
  • Also, non-oil exporters are now allowed free access to their Forex proceeds. 
  • Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by the authorized Dealers at the Daily Inter-Bank Rate. 
  • The Central Bank of Nigeria shall introduce the non-deliverable over-the-counter Naira-settled features with daily rates on the Central Bank approved FMDQ Trading and Reporting System. 
  • The over-the-counter Forex features shall be in non-standardized amounts and different fixed tenors that may be sold on any dates it wishes thereby ensuring bespoke maturity dates.

There you have it on the ” New Forex Policy in Nigeria “, share your thoughts and suggestions with us through the comment box and like us on facebook @ facebook.com/9jaquest or follow us on twitter @ twitter.com/NaijaQuest. Thanks.

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