CBN publishes new Guidelines for Deregulated Forex Market
- abolishes multiple exchange rates RT200 Rebate, Naira4Dollar schemes
The Central Bank of Nigeria (CBN) Wednesday officially abolished its extant multiple exchange rate regime and directed commercial banks to sell foreign exchange (forex) freely at market-determined rates.
The bank said the popular RT200 Rebate Scheme and the Naira4Dollar Remittance scheme would be stopped effective June 30, 2023, stressing that further guidance on these matters shall be provided in due course.
In a circular all authorized dealers and the general public, titled: “Operational Changes to the foreign exchange market,” released late Wednesday evening and signed by the Director Financial Markets CBN, Dr Angela Sere-Ejembi, the apex bank said all segments of the foreign exchange market are now collapsed into the Investors and Exporters (1&E) window.
The apex bank noted that applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.
According to the circular, the “Willing Buyer, Willing Seller” model at the I&E Window has been reintroduced.
“Operations in this window shall be guided by the extant circular on the establishment of the window, dated 21 April 2017 and referenced FMD/DIR/CIR/GEN/08/007.
“All eligible transactions are permitted to access foreign exchange at this window. The operational rate for all government-related transactions shall be the weighted average rate of the preceding day’s executed transactions at the I&E window, calculated to two (2) decimal places,” the CBN stated.
It further stated the introduction of the prescription of trading limits on oversold FX positions with permission to hedge short positions with over-the-counter (OTC) futures. Limits on overbought positions shall be zero.
The CBN has also re-introduced order-based two-way quotes, with a bid-ask spread of N1. All transactions shall be cleared by a Central Counter Party (CCP).
It further noted that there is the reintroduction of the Order Book to ensure transparency of orders and seamless execution of trades, whereas the operational hours of trades shall be from 9 am to 4 pm, Nigeria time.
The latest market rate said to be a “willing buyer, willing seller” arrangement permeated the foreign exchange market as the Naira depreciated against the US dollar, trading at N664.04/$ (from N471.67) at the (official) Investors and Exporters (I&E) window, data from the FMDQ Exchange has shown.
Conversely, the parallel market experienced an appreciation, with a rise of 0.85 per cent to N758/$ (from N765/$), as market forces attempted to converge.
In the same vein, one-month, three-month, and one-year Dollar/Naira forward rates closed at N666.79, N700.33, and 757.32, respectively, indicating N102.03, N189.10, and N191.70 losses.
