The Central Bank of Nigeria has announced the introduction of the Electronic Foreign Exchange Matching System (EFEMS) for foreign exchange (FX) trading on the Nigerian Foreign Exchange Market (NFEM).
This new system replaces the over-the-counter trading system that lasted nearly a decade to increase transparency and eliminate market distortions.
The EFEMS will come into force by December 1, according to an announcement by the Director-General of Financial Markets, Omolala Duke. “This development is expected to reduce speculative activities, eliminate market distortions, and strengthen CBN oversight,” the statement said.
A two-week trial run will take place in November, and the apex bank will publish real-time prices once EFEMS is operational.
The move to the Electronic Foreign Exchange Matching System (EFEMS) was made against the backdrop of currency controls imposed by Nigeria in 2017 at the peak of the economic crisis, Reuters reported.
At the time, the Central Bank of Nigeria (CBN) introduced multiple exchange rate regimes, including an over-the-counter trading system that obscured the naira’s fundamental weaknesses.
Under the old system, lenders could only transact buy and sell orders directly from customers, limiting the supply of dollars and negatively impacting the economy. With the introduction of the new system, the Central Bank of Nigeria (CBN) has announced plans to publish real-time price and buy/sell order data.
Along with this transition, the CBN has also issued updated guidelines for foreign exchange market participants.
