CBN Makes Immediate Changes to Nigerian Forex Market Operations
The Central Bank of Nigeria (CBN) is seeking to unify all segments of the forex market, by collapsing all previous windows into one, in a bid to improve operations, which has suffered from volatility in recent months. The move was announced on Wednesday by the Director of Financial Markets, Angela Sere-Ejembi, who said that the decision was effective immediately.
“Abolishing the segmentation of the FX market into different windows. All transactions will now be done through the Investors and Exporters (I&E) window, applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks,”
With this move, individuals applying for Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) can carry out their transactions at the official exchange rate at the I&E window, as determined by market forces.
According to the statement, the apex bank will
“reintroduce the ‘Willing Buyer, Willing Seller’ model at the I&E window, where all eligible transactions can access foreign exchange at their preferred rates,”
however, the CBN will set the operational rate for transactions related to the government. This rate will be the weighted average rate of the previous day’s executed transactions at the I&E window, rounded to two decimal places.
Floating exchange rate model
The introduction of market forces as the major determinants of exchange rates means the currency price will follow a floating exchange rate model. Analysts have welcomed the move by the CBN, with many suggesting that it will attract foreign investment and boost the economy.