The Central Bank of Nigeria (CBN) has announced the removal of the previous ±2.5% limit on interbank foreign exchange (FX) transactions. Effective immediately, this decision was communicated through a circular dated February 8, 2023, and sent to all authorized dealers. Additionally, the CBN disclosed the abandonment of previous restrictions on the disposal of interbank proceeds.
Endorsed by Omolara Omotunde Duke, Director of CBN’s Financial Markets Department, this directive aligns with the ongoing FX market reform efforts aimed at establishing a market-based price discovery system. Henceforth, the interbank foreign exchange rate will be determined by market dynamics such as demand and supply, guided by the interactions between buyers and sellers.
The CBN mandates all authorized dealers to conduct foreign exchange transactions based on the "Willing Buyer and Willing Seller" principle, while upholding high standards of transparency and price disclosure in all FX dealings in Nigeria.
This policy shift follows the CBN's earlier decision on January 31 to remove the rate cap for International Money Transfer Operators (IMTOs), further promoting transparency and market-driven exchange rates in Nigeria's FX market.
According to the "Revised Guidelines for the Operation of the Nigerian Inter-bank Foreign Exchange Market" document from June 2016, approved participants in the interbank FX market include authorized dealers, authorized buyers, oil and oil service firms, exporters, end-users, and any other entities specified by the apex bank.
One crucial aspect of the 2016 guidelines was a prohibition on the sale of interbank funds to Bureau-de-Change (BDC).
The latest directive from the Central Bank of Nigeria (CBN), which discontinues previous restrictions on the sale of interbank proceeds, now allows authorised dealers in the inter-bank forex market to sell market proceeds not only to Bureau-de-Change (BDC) operators but to other willing buyers outside the market as well.
The CBN has mandated authorised dealers to log all completed forex transactions on the designated treasury systems and report them to the relevant market authorities.
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