In an effort to revolutionise the nation’s foreign currency market, the Central Bank of Nigeria has announced the launch of an Electronic Foreign currency Matching System.

After a two-week test run in November, the new system is expected to be active in the Nigerian foreign exchange market by December 1, 2024.

Through increased openness and the promotion of a publicly accessible market-driven exchange rate, the EFEMS is anticipated to fundamentally alter the way foreign exchange transactions are carried out in the interbank market.

The EFEMS would mandate that all licensed dealers undertake foreign exchange transactions using the platform, guaranteeing that transactions are instantly reflected in the market, according to a circular issued by Omolara O. Duke, Director of the CBN’s Financial Markets Department.

As stated in the circular, “The Nigerian Central Bank hereby announces the launch of the Electronic Foreign Exchange Matching System, which will be put into effect on December 1, 2024, for foreign exchange transactions in the Nigerian Foreign Exchange Market.” November 2024 is scheduled for a two-week test run.

The CBN-approved Electronic Foreign Exchange Matching System will be used by authorised dealers to undertake all foreign exchange transactions in the interbank foreign exchange market. Transactions on this system would be instantly reflected.

With Nigeria still struggling with speculative trading and currency volatility, which have exacerbated market distortions, the implementation of the new system comes at a critical juncture.

By using the EFEMS, the CBN wants to limit these speculative actions while giving real-time data on exchange rates, including buy/sell orders.

The circular went on, “The new system is expected to facilitate a publicly accessible market-driven exchange rate and enhance governance and transparency.” It is anticipated that this development will lessen speculative activity, remove market distortions, and enhance the CBN’s supervision skills to efficiently control the market.

The CBN will release data from the system on buy/sell orders and real-time prices. It will also jointly release the EFEMS guidelines with the Financial Markets Dealers Association. Market participants will also receive guidance from the Nigerian FX Code and the updated Market Operating Guidelines for the Nigeria Foreign Exchange Market.

The Nigerian FX Code and revised Market Operating Guidelines will give players even more clarity, and the partnership between the CBN and the Financial Markets Dealers Association will guarantee that the regulations governing EFEMS are precisely specified.

The implementation of EFEMS by the CBN is perceived as a tactic to strengthen regulatory supervision and guarantee the smoother and more efficient operation of the Nigerian foreign exchange market.

Authorised dealers have a deadline for completing system integration, training, and paperwork, and they must adhere to current regulations while the system gets ready to go live.