CBN flexible Foreign Exchange Policy takes effect today

The Central Bank of Nigeria (CBN) new foreign exchange policy takes effect from today. This means the fixed rate 197 / US$1 introduced in February 2015 no longer holds. Governor of the CBN, Godwin Emefiele  announced the introduction of the new flexible foreign exchange policy on May 24th, 2016.

The new policy is expected to benefit the economy as it would improve liquidity in the Forex market. The economy would be stimulated because Nigeria products would be cheaper and imported goods would be more expensive.  Foreign companies would be willing to invest in Nigeria.

Highlights of the  new policy

Exchange rate would be market-driven using the order matching system of Thompson Reuters platform as well as the conversational dealing book

The forty-one (41) items classified as "not valid for "foreign Exchange" as detailed in a previous CBN circular shall remain inadmissible in the Nigerian FX market.

Proceeds of Foreign investment inflows and international money transfers shall be purchased by Authorised Dealers at the daily inter-bank rate; and non-oil exporters are now allowed unfettered access to the Fx proceeds, which shall be sold in the inter-bank market.

The CBN would participate via periodic intervention.

The CBN will also offer long term forex futures and sales of forex forwards for end-users must be trade-backed.

The Apex bank will also introduce non-deliverable OTC forex settled trades to help moderate volatility. The OTC settled forex feature shall be on non-standardised amounts.