The Nigerian naira gained substantial value last week, appreciating by over 8% as the Central Bank of Nigeria (CBN) introduced the Electronic Foreign Exchange Market System (EFEMS).
During the week, the naira appreciated from N1,663/$ to N1,535/$ at the official market, while the parallel market saw it strengthen from N1,700/$ to N1,570/$ by week’s end – a significant N126/$ gain within five days.
Analysts have attributed this appreciation to reduced speculative trading, increased forex liquidity, and cautious trading among market participants.
EFEMS consolidates the various forex trading windows, including the Investors and Exporters (I&E) Window and SME Window, into a single, unified system. The platform operates on an order-matching principle, where all transactions are displayed transparently, mimicking the trading mechanism of stock exchanges. Real-time data on bid and offer prices ensures clarity on market liquidity and prevailing rates.
Under the new guidelines, authorized dealers and Bureau de Change (BDC) operators must comply with stringent reporting requirements. Dealers are required to submit forex transaction reports to the CBN within 10 minutes, while BDCs must provide daily activity updates via automated portals.
However, only BDCs meeting the new capitalization requirements—either ₦500 million or ₦2 billion—can participate in the market, a move aimed at ensuring stability and reducing volatility.
The CBN’s reforms are already yielding results. Market transparency has curtailed speculative activities, and the consolidation of forex trade statistics enables better regulatory oversight. Additionally, the introduction of a $100,000 minimum trade value for interbank forex transactions has reduced market manipulation.
The private sector, represented by the Nigeria Employers’ Consultative Association (NECA), has lauded the reforms. NECA Director-General Adewale-Smatt Oyerinde emphasized the need for sustained efforts to stabilize the naira.
Despite the gains, analysts caution that the market’s reaction remains mixed. The sharp appreciation has unsettled speculators, while traders monitor the CBN’s policies for sustained improvements in Nigeria’s forex market stability.
