The Central Bank of Nigeria has removed the spread it placed on foreign exchange transactions barely seven months after it reintroduced the “Willing Buyer and Willing Seller” model.
The decision effectively allows forex transactions at a market-determined rate.
The decision was contained in a circular dated February 8, signed by the CBN Director of Financial Markets, Omolara Omotunde Duke.
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The apex bank believes the move would promote a market-based price discovery system.
The circular stated, “A key objective of the ongoing foreign exchange market reforms by the Central Bank of Nigeria to promote a market-based price discovery system.
“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 not limited to adopting appropriate price disclosures and transparency for transactions.
“Please note that all executed transactions are to be recorded immediately on the relevant treasury systems and reported to market authorities as stipulated.”
The CBN had in a circular referenced TED/FEM/PUB/PC/001/006 and issued on August 9,2023, directed an exchange rate cap spread of ±2.5 per cent of NAFEM previous day’s closing rate.
The rate applied to International Money Transfer Operators (IMTOs) and banks.