CBN introduces new guidelines for interbank FX trading via Bloomberg BMatch platform

The Central Bank of Nigeria (CBN) has announced comprehensive guidelines to govern interbank foreign exchange (FX) trading through the Electronic Foreign Exchange Matching System (EFEMS).

The initiative, effective December 2, 2024, aims to enhance transparency, market efficiency, and price discovery in Nigeria’s FX market.

Under the new framework, the CBN has established a minimum tradable amount of $100,000, with additional increments in clip sizes of $50,000. This threshold seeks to streamline transaction sizes while promoting transparency in interbank FX dealings.

Participants in the EFEMS are required to set credit and settlement limits for counterparties, ensuring that transactions exceeding these limits will not be executed. This measure is designed to mitigate credit risks and enhance market stability.

In a circular signed by Dr. Omolara Duke, Director of the Financial Markets Department, the CBN emphasized that all authorized dealers must integrate the Bloomberg BMatch platform for FX trading.

According to Dr. Duke, this platform will provide automated trade matching and allow the CBN to effectively monitor market activities.

The adoption of the Bloomberg BMatch platform marks a significant shift in the operational framework of Nigeria’s FX market.

Financial market analysts have welcomed the guidelines as a positive step toward addressing challenges in Nigeria’s volatile FX market. John Okonkwo, a financial economist at Lagos Business School, stated:

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“The introduction of EFEMS through the Bloomberg BMatch platform is a bold move by the CBN. It has the potential to improve efficiency and instill confidence among market participants. However, the $100,000 minimum tradable amount may exclude smaller players from the market, which could concentrate FX trading among larger institutions.”

Similarly, Tunde Akintola, an FX trader and market analyst, noted: “This initiative will enhance transparency, but its success hinges on the CBN’s ability to enforce compliance and ensure that system downtimes or operational glitches do not disrupt trading activities. Additionally, credit and settlement limits need to be carefully managed to avoid bottlenecks.”

Despite the potential benefits, concerns remain about the operational readiness of market participants to transition to the new system. Many banks may face challenges in integrating their existing FX trading operations with the Bloomberg BMatch platform.

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Moreover, some experts caution that while the guidelines are a step forward, broader systemic issues in Nigeria’s FX market, such as supply shortages and external debt pressures, must also be addressed to achieve long-term stability.

As Nigeria prepares for the December 2 rollout of the EFEMS, the CBN is expected to intensify training and technical support for authorized dealers to ensure a smooth transition.

Market participants are hopeful that the initiative will not only improve transparency but also contribute to stabilizing the naira and bolstering investor confidence.