CBN removes exchange rate cap on interbank FX transactions

The Central Bank of Nigeria (CBN) says it has discontinued the exchange rate market cap on the spread of interbank foreign exchange transactions.

This is contained in a statement dated February 8, 2024, signed by Omolara Duke, CBN director, financial markets department.

The cap is a -2.5 percent to +2.5 percent of the previous day’s closing rate on the Nigerian foreign exchange market.

The announcement is coming amid the recent directive by the apex bank to remove the allowable limit of exchange rate quoted by the international money transfer operators (IMTOs).

IMTOs were also directed to quote the closing rates from the Nigerian foreign exchange market.

In its latest notice, CBN spoke of the need to promote transparency, adding authorised dealers are to transact on a “willing buyer and willing seller” basis.

“A key objective of the ongoing foreign exchange market reforms by the Central Bank of Nigeria is to promote a market-based price discovery system,” CBN said.

“Consequently, the Bank hereby discontinues any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.

“Authorized Dealers are to continue to conduct their foreign exchange transactions on a “Willing Buyer and Willing Seller” basis. 

“In addition, they are to strictly adhere to high ethical standards in their dealings in the foreign exchange markets. 

“This includes but is not limited to adopting appropriate price disclosures and transparency for transactions.”

The financial regulator said all executed transactions are to be recorded immediately on the relevant treasury systems and reported to market authorities as stipulated.