CBN overhauls FX Market Rules, issues new guidelines with wide ranging implications

The updates, contained in a circular dated November 29, 2024, consolidate all FX windows, redefine the roles of market participants, and introduce stricter compliance and transparency measures.

This latest move is part of the apex bank’s efforts to address long-standing inefficiencies in the FX market while creating a transparent, well-regulated system.

The revised guidelines cover a wide range of regulatory and operational aspects, touching on the roles of Authorized Dealers, Bureaux de Change (BDCs), pricing mechanisms, interbank trading, compliance, and reporting standards.

Licensed BDCs back in action – One of the most significant changes in the revised guidelines is the inclusion of licensed Bureaux de Change (BDCs) in the official FX market.

However, the CBN emphasized that all transactions involving BDCs must align with their licensing terms and be reported in real time.

All FX windows Consolidated – In a bid to simplify operations and improve price discovery, the CBN has unified all FX market windows into a single framework.

This consolidation is expected to reduce market distortions and provide clearer guidance for participants.

Centralized Pricing through EFEMS- Pricing transparency is another focus of the revised guidelines as all FX transactions are now required to be priced through the Electronic Foreign Exchange Matching System (EFEMS), a centralized platform that will also publish daily FX rates for public access.

Stricter Reporting and Compliance Rules – The new guidelines also introduce rigorous reporting requirements

Structured Interbank Trading – The CBN is also formalizing interbank trading as Authorized Dealers are now required to do the following

The revised guidelines for the Nigeria Foreign Exchange Market (NFEM) introduce several changes that distinguish them from the previous frameworks. Below is a comparison highlighting key differences.

For Businesses and Individuals – The inclusion of BDCs is expected to improve access to FX for retail users, while centralized pricing through EFEMS ensures more transparency in rates.

For Market Participants – Authorized Dealers, BDCs, and other participants will need to upgrade their processes to meet real-time reporting and transparency requirements.

For the Economy – The consolidation of the FX market is expected to enhance investor confidence and attract foreign inflows.

For the Economy – The consolidation of the FX market is expected to enhance investor confidence and attract foreign inflows.

Download the new guidelines below…

REVISED GUIDELINES FOR THE (NFEM)