Governor of the Central Bank of Nigeria, Godwin Emefiele, on Wednesday, June 15, announced the new flexible exchange rate market.

To many Nigerians who don’t fully grasp the complexities of the forex market, below is a simplified guide – from the Presidency – which would help with a better understanding.

• The market shall operate as a single market structure through the inter-bank/autonomous window;
• The Exchange Rate would be purely marketdriven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book;
• The CBN would participate in the Market through periodic interventions to either buy or sell FX as the need arises;
• To improve the dynamics of the market, we will introduce FX Primary Dealers (FXPD) who would be registered by the CBN to deal directly with the Bank for large trade sizes on a two-way quotes basis;
• These Primary Dealers shall operate with other dealers in the Inter-bank market, amongst other obligations that will be stipulated in the Foreign Exchange Primary Dealers (FXPD) Guidelines.
• There shall be no predetermined spread on FX spot transactions executed through the CBN intervention with Primary Dealers, while all FX Spot purchased by Authorized Dealers are transferable in the inter-bank FX Market;
• The Forty-One (41) items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN Circular shall remain inadmissible in the Nigerian FX market;
• To enhance liquidity in the market, the CBN may also offer long-tenored FX Forwards of 6 to 12 months or any tenor to Authorized Dealers;
• Sale of FX Forwards by Authorized Dealers to end-users must be trade-backed, with no predetermined spreads;
• The CBN shall introduce non-deliverable over-the-counter (OTC) Naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian Foreign Exchange Market, which would help moderate volatility in the exchange rate by moving non-urgent FX demand from the Spot to the Futures market;
• The OTC FX Futures shall be in nonstandardized amounts and different fixed tenors, which may be sold on any dates thereby ensuring bespoke maturity dates;
• Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorized Dealers at the Daily Inter-Bank Rate.
• Non-oil exporters are now allowed unfettered access to their FX proceeds, which shall be sold in the Inter-bank market.