Breaking: Naira gains massively against dollar

The Naira has appreciated to N1,587.29/$1 in the official market as EFEMS drives transparency and market efficiency.

The launch of Electronic Foreign Exchange Matching System (EFEMS) by the Central Bank of Nigeria (CBN) has propelled the naira to significant gains, with rates strengthening to N1,587.29 to the dollar in the official market, and N1,640 at the parallel market.

EFEMS, which commenced operations on Monday, had seen appreciation in the value of the naira since its inception.

The platform had also been commended by analysts as a pivotal tool in eliminating distortions and bringing greater efficiency to Nigeria’s volatile foreign exchange market.

A breakdown of the movements at the parallel market this week showed that it began registering gains on Tuesday, trading at N1,720/$1 from a stagnant rate of N1,745/$1, which had persisted for over a month.

On Wednesday, the naira appreciated sharply to N1,670/$1and further strengthened to N1,640/$1 on Thursday.

On the official market, CBN quotes for the Nigerian Foreign Exchange Market (NFEM) showed the average rates starting at N1,662.77 on Monday, improving to N1,644.78 on Tuesday, and further to N1,613.86 on Wednesday, before hitting N1,587.29 on Thursday.

In a circular announcing the EFEMS platform, the CBN detailed that it facilitates spot foreign exchange transactions between the naira and the U.S. dollar. The platform, operated through Bloomberg’s BMatch system, requires a minimum trade value of $100,000, with incremental trade sizes of $50,000.

The apex bank stated that the platform seamlessly integrated with banks’ middle and back-office systems, and it generated consolidated trade statistics that were accessible to the market, according to Bloomberg

The platform is accessible to all CBN-licensed dealer banks, the central bank said.

According to CBN, EFEMS is a critical tool for reducing counterparty risks and ensuring market discipline.

Trades conducted on the platform are binding, with participants required to set credit and settlement limits to avoid exceeding thresholds.

Governor of CBN, Mr. Olayemi Cardoso, speaking at the Chartered Institute of Bankers (CIBN) 59th annual bankers’ dinner in Lagos, recently, stated that EFEMS was a transformative step towards market transparency and price discovery.

He said, “The unification of the exchange rate is a pivotal reform, but it marks just the beginning. On the 2nd of December 2024, the foreign exchange market will begin trading on the electronic FX matching system to further enhance transparency, restore confidence, and attract new investments.”