This decision by the apex bank comes after it directed commercial banks to remove the cap on the naira at the investors' and exporters' window. The move is aimed at enhancing flexibility and efficiency in the foreign exchange market, and it aligns with the CBN's efforts to stimulate economic growth and attract foreign investments.
The CBN clarified that certain categories of transactions will continue to be processed through deposit money banks. These include applications for medicals, school fees, Basic Travel Allowance (BTA), Personal Travel Allowance (PTA), and Small and Medium Enterprises (SMEs). This ensures that essential transactions for individuals and businesses are still facilitated through the banking system.
Furthermore, the CBN announced the cessation of two schemes, namely the RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, effective from June 30, 2023. These schemes were previously implemented to incentivize remittances and promote stability in the foreign exchange market.
The operational changes outlined by the CBN include the re-introduction of the "Willing Buyer, Willing Seller" model at the I&E window, guided by a circular issued on April 21, 2017. This model allows eligible transactions to access foreign exchange at the I&E window, ensuring a transparent and market-driven approach.
The CBN also stated that the operational rate for all government-related transactions will be based on the weighted average rate of the preceding day's executed transactions at the I&E window. This promotes consistency and fairness in the pricing of foreign exchange for government transactions.
In addition, the CBN proscribed trading limits on oversold foreign exchange positions, granting permission to hedge short positions with Over-The-Counter (OTC) futures. However, the limits on overbought positions will be set at zero to discourage excessive speculation.
To enhance transparency and streamline trading activities, the CBN reintroduced order-based two-way quotes with a bid-ask spread of A1. All transactions will be cleared by a Central Counter Party (CCP), ensuring efficient execution and reducing counterparty risks.
To facilitate order placement and execution, the CBN reintroduced the Order Book, enabling market participants to access and view orders, ensuring transparency and fair pricing. The operational hours for trades have been set from 9 am to 4 pm, in line with Nigerian time.
The CBN emphasises that all market participants and the general public are expected to abide by these new rules to ensure a smooth transition and effective operation of the foreign exchange market.
These changes come at a time when the suspension of Godwin Emefiele as CBN governor by President Bola Ahmed Tinubu last Friday continues to generate discussions. It is worth noting that President Tinubu, in his inaugural speech, had pledged to unify the country's foreign exchange market and boost investor confidence, signaling a commitment to implement measures aimed at strengthening the economy.
As Nigeria moves forward with these operational changes, market participants and the public will closely observe the impact on the foreign exchange market and its overall effect on the country's economic stability and growth.