FOREX Nigeria: Guidelines for the Operation of the New Foreign Exchange Regime

The Governor of the Central Bank of Nigeria (CBN) held a press conference yesterday (15 June 2016) to introduce its flexible exchange rate policy. We have summarized below the guidelines for the operation of the new foreign exchange regime:

  • The foreign exchange market will now operate as a single market through the Interbank Foreign Exchange Market (IFEM).  Participants in the IFEM will include Authorised Dealers, Authorised Buyers, Oil Companies, Oil Service Companies, Exporters, End-Users and any other entity the CBN may designate from time to time
  • Authorised Dealers are now permitted to buy and sell foreign exchange among themselves on a two-way quote basis via the FMDQ Thomson Reuters foreign exchange trading systems( TRFXT- Conversional Dealing), or any system approved by the CBN
  • Exchange rates will now be determined by market forces
  • There will no longer be spread restrictions
  • The applicable exchange rate for the purpose of import duty payments shall be the daily IFEM foreign exchange closing rate as published by the CBN
  • Proceeds of foreign investment inflows and international monetary transfers shall be purchased by Authorised Dealers at the IFEM
  • The CBN will participate in the IFEM through periodic direct interventions or dynamic “Secondary Market Intervention Mechanisms”
  • Primary Dealers will now be registered to deal directly with the CBN for large deal sizes on a two-way quote basis. These dealers, which will be appointed and notified by Friday, 17 June 2016, will operate with other Authorised Dealers
  • The 41 items listed as “Not Valid for Foreign Exchange” in the CBN Circular of 23 June 2015, will remain ineligible for foreign exchange on the IFEM
  • The CBN may now offer long-tenor foreign exchange forwards to Authorised Dealers
  • Sale of foreign exchange forwards must now be trade-backed, and with no pre-determined spread
  • Over-the-counter foreign exchange futures will be introduced. Such futures may be bespoke and of non-standard volume
  • Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which shall be sold on the IFEM
  • IFEM trading under the new guidelines will begin on Monday, 20 June 2016.

Please find attached a copy of the Revised Guidelines for Flexible Exchange Rate MarketJune 2016 v1 for the Operation of the Nigerian Inter-bank Foreign Exchange Market.

For further enquiries on the above, please contact:

Victor Onyenkpa NG-FMTAXEnquiries@ng.kpmg.com

David Okwara

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