The Central Bank of Nigeria (CBN) has introduced new guidelines for interbank foreign exchange (FX) trading through its Electronic Foreign Exchange Matching System (EFEMS), effective from November 25, 2024. The guidelines, signed by Dr. Omolara Duke, Director of the Financial Markets Department, set a minimum trade value of $100,000 for all interbank FX transactions.
These changes are aimed at improving market transparency, enhancing trading efficiency, and ensuring compliance within Nigeria’s FX market. EFEMS will help streamline the trading process and reduce counterparty risks, as the CBN seeks to create a more organized and transparent FX market.
Key Guidelines of the EFEMS
- Minimum Trade Value and Incremental Clip Sizes:
All interbank FX trades on EFEMS will require a minimum transaction value of $100,000, with trades to be executed in increments of $50,000. The platform will only facilitate spot FX transactions between the Nigerian naira (NGN) and the U.S. dollar (USD). The CBN reserves the right to include additional currency pairs in the future.
- Order-Matching Platform:
Bloomberg’s BMatch system will serve as the official order-matching platform for EFEMS. Trading hours will run from 9:00 AM to 4:00 PM West Africa Time (WAT) on business days.
- Binding Trades:
All trades executed on EFEMS are binding unless both parties mutually agree to cancel them, with written approval from the CBN.
- Credit and Settlement Limits:
Participants must set credit and settlement limits for all counterparties. Trades exceeding these limits will not be executed. Participants are also required to set appropriate credit and settlement limits with the CBN as a counterparty bank.
- Compliance with Regulations:
All participants must comply with the Nigerian Foreign Exchange Code and other CBN regulations. Any violations or transactions outside the prescribed limits must be reported promptly.
- Anonymity and Reporting:
Trades will remain anonymous until matched, with counterparty details revealed only after the transactions are completed. Transactions that exceed set limits or deviate from the guidelines must be logged on the FX blotter within 10 minutes.
Participation Criteria
Only authorized dealer banks licensed by the CBN are eligible to participate in EFEMS. Other financial institutions must obtain prior approval from the CBN to join. Participants are required to maintain accurate profiles, adhere to credit and settlement limits, and execute agreements with the CBN-approved platform provider. If a participant wishes to exit the platform, they must provide a 30-day notice and settle all outstanding obligations.
Monitoring and Penalties
The CBN will monitor all transactions on EFEMS to ensure market integrity. Participants are required to submit daily reports on trade volumes, settlement statuses, and counterparties. Violations of the guidelines may result in penalties, including suspension or revocation of access to the platform. The CBN also has the authority to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.
Launch of Bloomberg BMatch System
The CBN also announced that the Bloomberg BMatch system will officially launch on December 2, 2024, as the platform for foreign exchange trading under EFEMS. The system will streamline FX transactions and enable better oversight of market performance. The CBN has urged all authorized dealers and banks to liaise with Bloomberg representatives to facilitate a smooth onboarding process.
These changes are expected to enhance the operational efficiency of Nigeria’s FX market, promote transparency, and strengthen the CBN’s regulatory capacity.
