CBN Issues New Directive On Forex Transactions

Yemisi Izuora

The central bank of Nigeria (CBN), has again reiterated its determination to further develop the foreign exchange market,promising to sustain initiatives that serves to improve the market structure.

Consequent upon that and further to the its previous circular referenced FMD/DIR/CIR/GEN/0i/007 dated April 21, 2017 on the establishment of the Investors & Exporters (I&E) FX window, the CBN has issued the new directives, saying that henceforth, authorized dealers may defease their excess currency trading positions to other Authorized dealers without seeking prior approval from the CBN.

The circular also said that all inter-bank transactions shall be subject to a maximum spread of N1.00, while funds purchased by an Authorized dealer from another Authorized dealer, in the inter-bank market, shall not be held in position over night by the buying Authorized dealer or sold another Authorized dealer.

Also the circular notes that such inter-bank purchases shall only be sold by the buying Authorized dealer to its customers for permitted/eligible transactions, while all documentation requirements for permitted transactions shall apply.

It also notes that  authorized dealers shall not exceed their respective currency trading position limits (FCTPL) without the approval of the CBN and that compliance with FCTPL shall be strictly monitored by the CBN.

“All inter-bank trades – spot, forwards, futures, options and swaps – that have an impact on an Authorized dealers FCTPL are expected to comply with great reasonability standards.

The CBN reserves the right to intervene, as a buyer or seller, as it deems fit in the inter-bank market. Authorized dealers must report to the CBN, details (source and applications indicating the amount, counter party, deal rate, etc.) of all inter-bank purchases/sales by 4pm daily through the portal provided’ the circular said.

On-Boarding of FMDQ Trading System, the CBN, advised authorized dealers to encourage their corporate clients to on-board the FMDQ-advised FX trading system immediately, to avoid sanctions, foster the speedy migrations of the activities of the I&E FX window onto the FX trading system and, in turn, ensures that the objective of deepening the market is achieved.

Alvan E. Ikoku Director financial market department of the CBN who signed the document warned all to comply as the circular takes immediate effect.

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