Nigeria: CBN Streamlines Foreign Exchange Processes, Abolishes Multiple Exchange Rate Window

The Central Bank of Nigeria (CBN) has officially announced significant changes in the country’s foreign exchange market operations.

In a statement issued on Wednesday (August 9, 2023) night by Angela Sere-Ejembi, Director of Financial Markets, the CBN confirmed the alterations.

Sere-Ejembi revealed that all foreign exchange transactions will now be consolidated within the Investors and Exporters (I&E) window, where market forces will determine the exchange rate.

She also emphasized that certain transactions such as medical bills, school fees, Basic Travel Allowance (BTA)/Personal Travel Allowance (PTA), and Small and Medium Enterprises (SMEs) applications will continue to be handled through Deposit Money Banks.

Here are the key changes outlined in the CBN’s statement:

1. Abolishment of Segmentation: All market segments will now operate under the Investors and Exporters (I&E) window.
2. “Willing Buyer, Willing Seller” Model: The I&E Window will reintroduce this model, where foreign exchange operations will adhere to established guidelines.
3. Operational Rate for Government Transactions: The operational rate for government-related transactions will be the weighted average rate of the previous day’s I&E window executed transactions.
4. Prohibition of Trading Limits on Oversold FX Positions: There will be no trading limits on oversold foreign exchange positions. Short positions can be hedged with over-the-counter (OTC) futures.
5. Order-Based Two-Way Quotes: A bid-ask spread of N1 will be applied, and transactions will be cleared by a Central Counter Party (CCP).
6. Reintroduction of Order Book: An Order Book will be reinstated to enhance order transparency and facilitate seamless trade execution.
7. Revised Operational Hours: Trading will occur from 9am to 4pm Nigerian time.
8. Cessation of RT200 Rebate Scheme and Naira4Dollar Remittance Scheme: These schemes will cease from June 30, 2023.

The CBN urged all market participants and the public to adhere to these updated rules and regulations.

These changes represent a significant step toward streamlining and optimizing Nigeria’s foreign exchange market operations.