The naira recorded a huge gain against the US dollar at the parallel market, hitting N1640/$1, at the close of business on Wednesday, December 4, 2024.
This represents a 5.2% or N90 gain against the dollar when compared to the N1730 that was recorded the previous trading day.
The massive appreciation recorded against the dollar is coming with the kick-off of trading activities at EFEMS PLATFORM which the BDCs operators believe will bring about transparency in the forex market and enhance regulatory oversight.
According to information made available to Nairametrics, the exchange rate for dollar inflow on the parallel market is N1640/$1, while the rate for cash transactions closed at N1664/$1 at the end of the day’s trading activities.
Naira gains big
The newly introduced Enhanced Foreign Exchange Market System (EFEMS) by the Central Bank of Nigeria (CBN) recorded a remarkable first and second day of trading as supply reportedly outstripped demand.
- This new forex trading window consolidates Nigeria’s foreign exchange markets, replacing the Investors and Exporters (I&E) window in a bid to simplify and increase transparency in the forex market.
- Reports reaching Nairametrics indicate that trading volumes surged significantly, with sources close to the market revealing that supply exceeded demand.
- Sources suggest the exchange rate on the official market closed at N1,595 to the dollar. However, the CBN website displayed N1613.69/$1 on Wednesday December 4th 2024.
- The exchange rate closed at N1,643.15 on the first day of the operation of the EFEMS per CBN website.
- While exact data on trading volumes remains uoffical, the sentiment suggests a potentially strong start for the EFEMS, with market participants optimistic about the liquidity this system might bring.
- Nairametrics also observed that the FMDQ no longer provides forex data as the Investor & Exporter Window is no longer in operation.
Despite the positive signs shown on the first two days of trading, experts suggest that sustaining this momentum will require robust policy backing and an unwavering commitment to supply-demand balance.
The success of this initiative depends largely on the CBN’s ability to maintain liquidity and curb market distortions, particularly speculative trading that has historically plagued Nigeria’s forex markets.
Backstory
The Central Bank of Nigeria (CBN) released revised guidelines for the Nigeria Foreign Exchange Market (NFEM), signaling a major shake-up in the country’s FX operations.
- The updates, contained in a circular dated November 29, 2024, consolidate all FX windows, redefine the roles of market participants, and introduce stricter compliance and transparency measures.
- This latest move is part of the apex bank’s efforts to address long-standing inefficiencies in the FX market while creating a transparent, well-regulated system.
- A major focus of the revised guidlines focus of the revised guidelines requires that all FX transactions are to be priced through the Electronic Foreign Exchange Matching System (EFEMS), a centralized platform that will also publish daily FX rates for public access.
The platform replaces the fragmented system of multiple windows, such as the Investors & Exporters (I&E) FX Window, SME Window, and Invisible Window.
