CBN Fixes $100,000 Benchmark For Banks on Electronic Foreign Exchange Matching System

The Central Bank of Nigeria (CBN) has set a minimum trade value of $100,000 for interbank foreign exchange trading via the Electronic Foreign Exchange Matching System (EFEMS).

This was contained in a new directive dated November 25, 2024, and signed by CBN’s Director of the Financial Markets Department, Dr Omolara Duke, noting that the development is part of efforts to ensure transparency, efficiency, and compliance within Nigeria’s FX market.

The EFEMS, which is set to go live on December 2, is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations.

The statement also said CBN has designated Bloomberg’s BMatch as the official order-matching platform for interbank transactions, with trading hours set between 9:00 am and 4:00 pm West Africa Time on business days.

The apex bank also said the $100,000 minimum tradable amount comes with incremental clip sizes of $50,000.

The EFEMS is also limited to spot FX transactions involving the Nigerian Naira and the United States Dollar. This means transactions occur “on the spot” or close to the trade date.

The CBN, however, retained the discretion to introduce other currency pairs when deemed necessary.

The guidelines document read, “All trades consummated on EFEMS are binding unless cancelled by mutual agreement of both parties with written approval from the CBN.

“The minimum tradable amount is US$100,000.00, with incremental clip sizes of US$50,000.00.

“Participants must set credit and settlement limits for other counterparties in the system. Transactions exceeding these limits will not be executed.

“Participants must have adequate credit and settlement limits set for the CBN as its counterparty bank.

“Participants are required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.”

The CBN noted that participation in the EFEMS is limited to authorised dealer banks while other institutions wishing to join the platform must first obtain prior approval.

These entities are also required to execute agreements with the CBN-approved platform provider, maintain accurate profiles, and operate within prescribed credit and settlement limits.

Withdrawal from the platform must be preceded by a 30-day notice, along with the resolution of any outstanding obligations.

Also, trades conducted via the platform will remain anonymous until matched. Counterparty details will only be revealed once transactions are concluded, in line with settlement protocols.

Transactions exceeding set limits or conducted outside EFEMS parameters must be reported promptly and logged onto the FX blotter within 10 minutes.

The CBN emphasised that it will closely monitor all transactions on EFEMS to ensure market integrity and transparency.

Participants are also required to submit daily reports detailing trade volumes, settlement statuses, and counterparties.

The CBN discloses that it also reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.

Any violations of the EFEMS guidelines or related regulations will attract strict penalties, including the suspension or revocation of access rights.

The CBN further stated that it will periodically review the platform’s operations to ensure efficiency and compliance with its directives.