CBN to automate FX trades from December

The Central Bank of NigeriaCentral Bank of Nigeria (CBN) is set to automate foreign currency trades starting in December, moving away from a nearly decade-old over-the-counter trading system. This transition aims to enhance transparency and eliminate market distortions.

The CBN announced that the new system will “facilitate a market-driven exchange rate accessible to the public” and has released new guidelines for participants in the foreign exchange market.

“This development is expected to reduce speculative activities, eliminate market distortions, and give the CBN improved oversight,” the bank stated in a circular dated October 2.

The CBN indicated that a two-week test run would occur in November, although specific dates were not provided.

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This transition follows the currency controls implemented in Nigeria in 2017, during a significant economic crisis, when the CBN introduced multiple exchange rate regimes, including an over-the-counter trading system that concealed the weaknesses of the naira currency.

Under the previous system, lenders could only trade buy or sell orders from customers, which restricted dollar supply and negatively impacted the economy. With the new automated system, the CBN stated that it would publish real-time prices and data on buy/sell orders.

Data from LSEG indicated that the naira was trading at 1,634 to the dollar as of 12:40 GMT on Friday. The currency has reached record lows in both the official and parallel markets since the liberalisation of the currency market last year.