The naira has depreciated against the US dollar in the foreign exchange market, coinciding with the Central Bank of Nigeria’s (CBN) announcement of Bloomberg BMatch as the designated platform for the Electronic Foreign Exchange Matching System (EFEMS) for interbank trading.
Effective December 2, 2024, the CBN has approved the Bloomberg BMatch platform for banks to execute interbank FX transactions. Analysts predict that the platform will enhance transparency, improve price discovery, and better align forex market demand and supply.
Naira Weakens Across Markets
Spot FX data from the FMDQ platform showed that the naira declined by 0.08%, closing at N1,660.83 per US dollar in the official market. This depreciation reflects persistent liquidity challenges and growing demand pressures in the FX market. Similarly, the naira lost value against the US dollar in the parallel market due to related liquidity constraints.
Despite the depreciation, market stakeholders have responded positively to the CBN’s decision to adopt the Bloomberg BMatch system for interbank FX trading, which is expected to introduce greater efficiency into the market.
CBN Guidelines for EFEMS
The CBN has issued detailed guidelines to regulate interbank FX trading through EFEMS. According to the apex bank, the system aims to promote transparency, fairness, and efficiency while minimizing counterparty risks and ensuring compliance with CBN regulations.
- Trading Hours: FX trading will operate from 09:00 to 16:00 WAT on business days. Unmatched orders will be cleared at the end of each session and can be resubmitted the following day.
- Anonymous Quotes: All quotes on EFEMS will remain anonymous until matched, after which counterparty details will be disclosed for settlement.
- Binding Trades: All trades executed on EFEMS are binding, with cancellations permitted only by mutual agreement and written approval from the CBN.
Operational Rules and Limits
The CBN has set a minimum tradable amount of US$100,000, with incremental clip sizes of US$50,000. Participants must establish credit and settlement limits for all counterparties, including the CBN as a counterparty. Transactions exceeding these limits will not proceed.
For now, the platform will exclusively handle spot FX transactions involving the naira (NGN) and the US dollar (USD). However, the CBN has indicated that additional currency pairs may be introduced in the future.
Settlement and Reporting Requirements
All transactions conducted on EFEMS must be settled through approved systems, with participants held responsible for meeting their obligations. Any default on settlements will attract penalties, as determined by the CBN.
Additionally, authorized dealer banks must submit daily transaction reports to the CBN, including details of trade volumes, counterparties, and settlement statuses. To enhance market governance, interbank trades conducted outside EFEMS—such as telephone transactions—must be confirmed via the Request for Quotation (RFQ) system and immediately reported on EFEMS.
Market Expectations
The automated platform is expected to streamline FX transactions, reduce inefficiencies, and address liquidity issues that have long plagued Nigeria’s foreign exchange market. By introducing these measures, the CBN aims to restore confidence among participants and stabilize the naira’s performance in both official and informal markets.
