The Central Bank of Nigeria’s (CBN) newly introduced foreign exchange market system has been credited for the remarkable appreciation of the naira against major global currencies.
Bankers have attributed the appreciation to the Electronic Foreign Exchange Matching System (EFEMS), launched last Monday. The system, facilitated through Bloomberg BMatch, aims to streamline trading activities in the forex market.
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In a circular directing banks to adopt EFEMS effective December 2, 2024, the CBN stated: “Banks are strongly advised to liaise with Bloomberg representatives to expedite the onboarding process and address any technical or operational concerns promptly.
“The CBN will deploy its regulatory power to enhance the implementation of this directive and reserves the right to impose sanctions when necessary.”
For the first time since May 2024, the naira achieved five consecutive days of appreciation across all segments of the foreign exchange market. The naira closed at N1,535 and N1,555 per dollar in the official and parallel markets respectively over the weekend.
A bank executive, who spoke anonymously, described the system as promising: “The system seems to be quite good. It seems to be achieving its goal as you get a feel of where the market is, real time.
“People are putting up orders on the system, matching trades and helping with market colour. It looks and seems to be good, and the naira has appreciated since its launch. CBN also intervened using the system. Time will tell if the market appreciation can be sustained. But there will definitely be some equilibrium down the line.”
The gap between the parallel market and official market rates has narrowed significantly, dropping to N20 per dollar compared to N118 per dollar the previous week. This reflects a substantial appreciation of N168, or 9.8%, from the earlier rate of N1,720 per dollar.
Black market operators also confirmed the impact of EFEMS and increased dollar availability. Yakubu Giwa, a trader, explained: “Today (Saturday) the naira stood at N1,500 per dollar. We black market traders are struggling to sell what we bought. The current appreciation of the naira is as a result of activities such as people in the diaspora returning home, and those in the country are spending money on food items and other preparations for the festive season.
“Those in the diaspora are also sending money to their families and relatives in Nigeria, resulting in more inflows. Individuals with dollars are bringing it out, seeing the intense appreciation going on now, but many are unable to sell it because those in the business are still struggling to sell theirs.
“The market dealers are also afraid of bearing losses because the naira might appreciate to N1,300 or N1,200 per dollar before next weekend. So they are cautiously buying dollars.”
Umoru Yahaya, another black market trader and gold seller, noted that the naira’s appreciation extends beyond the dollar: “Apart from the appreciation of the naira against the dollar, it is also appreciating against the pound sterling, euro, and other foreign currencies.
“Yesterday I traded sterling at around N2,200, today (Saturday) it is around N1,700. Look at the value of gold that was N150,000 per gram two weeks ago. It has also dropped to N120,000 and going to N115,000 per gram as of today.
“Those harbouring dollars in their houses are unable to sell it because of the appreciation pressure that has made many of us very cautious of the quantity of dollars we buy so as not to be on the losing side. This morning the dollar traded for as low as N1,500 per dollar and before the close of the day it might reach N1,450 per dollar.”
The CBN’s intervention through EFEMS has not only strengthened the naira but also narrowed the disparity between market segments, fostering stability in Nigeria’s foreign exchange market.
