BREAKING: Nigerians To Get More Dollars, Others As CBN Loosens Tight Grip On Foreign Exchange
The Central Bank of Nigeria (CBN) has embraced a more market-driven approach to its foreign exchange (FX) policy.
In a circular FMD/DIR/PUB/CIR/001/012, signed by Duke, Omolara Omotunde, the Director of the Financial Markets Department, the CBN announced the removal of the spread on foreign exchange transactions.
Omotunde stated, “the Bank hereby discontinues any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.”
“Authorized dealers are to continue to conduct their foreign exchange transactions on a ‘Willing Buyer and Willing Seller’ basis. In addition, they are to strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but not limited to adopting appropriate price disclosures and transparency for transactions.”
This shift signifies a move towards letting the market determine the price of foreign exchange.
The objective is to improve transparency, efficiency, and flexibility in the FX market, ultimately benefiting individuals and businesses.
Previously, the CBN imposed limits on the difference between buying and selling prices for FX, known as the “spread.”
However, these caps have now been lifted, allowing banks to set their own prices based on supply and demand. This empowers the market to establish the “fair” price for foreign currencies, especially the US dollar.
Banks now have greater flexibility in selling FX to any interested parties, potentially leading to faster and easier access to foreign currency for businesses and individuals.
Despite this newfound freedom, the CBN emphasizes the importance of transparency. Banks are mandated to clearly display their prices, refrain from misleading customers, and report all transactions to the CBN.
The CBN anticipates several positive outcomes from this new approach, including promoting fairness and efficiency in the FX market, encouraging foreign investment, and reducing reliance on the risky and illegal black market.
With banks determining their own prices, customers may find better deals on FX, although FX rates may become more volatile due to market dynamics.
The CBN assured that it will continue to monitor the market closely and make necessary adjustments as required.
