as new forex system gains traction
The Central Bank of Nigeria’s (CBN) implementation of the Electronic Foreign Exchange Matching System (EFEMS) has triggered a remarkable rebound for the Naira, marking its strongest performance in months.
The local currency appreciated for five consecutive days last week, narrowing the gap between official and parallel market exchange rates.
CBN’s Bold Move: Introducing EFEMS
The Naira’s resurgence is linked to EFEMS, which the CBN rolled out on December 2, 2024. The system leverages Bloomberg BMatch technology to enhance transparency and efficiency in Nigeria’s foreign exchange market.
In a circular, the CBN instructed banks to expedite onboarding and warned of sanctions for non-compliance.
By weekend trading, the Naira closed at N1,535/$1 in the official market and N1,555/$1 in the parallel market, a dramatic improvement from its previous positions. This development reflects a growing alignment between forex trading mechanisms and market realities.
Market Insights: Analysts and Stakeholders React
Market insiders have expressed cautious optimism about EFEMS. A senior bank executive noted, “The system allows for real-time market insights, helping stabilize the market. The Naira has appreciated since its launch, though time will tell if the trend is sustainable.”
The margin between the official and black market rates has narrowed to N20/$1, down from N118/$1 the prior week, signalling increased liquidity and reduced speculative pressure.
Holiday Season Inflows Bolster Naira
Black market operators credit the festive season for additional dollar inflows. Diaspora remittances and increased spending by returnees have boosted dollar supply, further strengthening the Naira.
Yakubu Giwa, a currency trader, said, “There’s so much dollar supply that traders are struggling to sell. Many are cautious, anticipating further appreciation to N1,300 or N1,200/$1 before next weekend.”
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Broader Impact: Commodities and Other Currencies
The Naira’s appreciation extends to other major currencies, with the Pound Sterling trading at N1,700 from N2,200 last week.
Commodity prices have also adjusted, with gold falling from N150,000/gram to N120,000/gram, and silver dropping from N50,000/gram to N20,000/gram.
The Naira’s rebound, fuelled by CBN’s regulatory intervention and seasonal inflows, offers hope for long-term currency as new forex system gains traction, supported by inflows from holiday makers
Source:Global Financial Digest
