Electronic FX platform seen promoting transparency
Analysts have welcomed the Central Bank of Nigeria’s (CBN) introduction of the Electronic Foreign Exchange Matching System (EFEMS), describing it as a positive step towards improving transparency and efficiency in the foreign exchange market. The CBN introduced new guidelines for forex trading through the EFEMS, which came into effect on Monday.
According to an analyst, who preferred to remain anonymous, the move signals the CBN’s effort to make the market more transparent and liquid. “By requiring banks to display their real-time quotes and match orders, with supply aligned to available rates based on market realities, this initiative should promote a fair and robust FX market,” the analyst explained.
The new guidelines are expected to enhance transparency, efficiency, and regulatory compliance within Nigeria’s foreign exchange market. The CBN has also mandated a minimum trade value of $100,000, with the platform designed to streamline interbank FX trading, reduce counterparty risks, and ensure compliance with CBN regulations.
A deals advisory and tax expert, described EFEMS as a game-changer that could bring much-needed transparency and efficiency to Nigeria’s foreign exchange market. He also expressed optimism that it would help address some of the country’s ongoing FX challenges. Babatunde noted that the CBN’s move to digitise forex transactions is part of broader reforms introduced by the Yemi Cardoso-led central bank to stabilise the forex market and improve the system.
“Traditional systems are often plagued by inefficiencies, speculative trading, and limited transparency, all of which contribute to market distortions. EFEMS is designed to enhance governance, transparency, and support a market-driven exchange rate.
The naira, Nigeria’s currency, has continued to decline in both official and unofficial foreign exchange markets, with speculators exacerbating the situation. Since the naira was devalued last year, it has lost over 70 percent of its value, making it one of the worst-performing currencies globally. This decline has been attributed to various factors, including a limited supply of dollars, poor oil production, and forex speculation.
A tax auditor, shared his thoughts on LinkedIn, stating that EFEMS aims to establish a central clearing house for forex transactions, rather than focusing solely on the digitalisation of FX. “It’s long overdue, provided it’s implemented correctly.
Source:businessday
