The Central Bank of Nigeria (CBN) has officially announced a new foreign exchange policy and has listed some implications of new development. The implication of this is that the Nigerian currency has been floated and that there will be a single market for acquisition of the foreign currency. Godwin Emefiele, the CBN governor, made this announcement during a press conference in Abuja on Wednesday afternoon. Analysts including those at Renaissance Capital Ltd had said they expect the CBN to allow the naira to weaken around a trading band in the interbank market, while allocating dollars at a fixed rate to industries the government deems strategic. According to Channels TV, the market would operate as a single market structure via the interbank market and authorised dealers an implication that it would be purely an exchange rate market managed via Thompson Reuters platform. It stated also that part of the key notes is that the CBN would participate via periodic intervention and would introduce primary dealers that deal with the CBN on a two way quote basis while the primary dealers are also expected to deal with other players in the interbank market. Also, there shall be no pre-determined spreads on forex transactions and all forex purchases shall be transferable while 41 items shall remain inadmissible in the forex market for forex transactions. Therefore, the CBN will also offer long term forex futures and sales of forex forwards for end users must be trade-backed as well as introduce non-deliverable OTC forex settled trades to help moderate volatility. Only authorised dealers are allowed to purchase proceeds of forex daily at the interbank rates guidelines of which the CBN says it will introduce to primary dealers on Friday. Consequently, interbank trading would begin on Monday, June 20 and tenors and rates for OTC settled forex feature would be announced same day.
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