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Central Bank of Nigeria Allows Banks to Set Foreign Exchange Rates

February 12, 2024

 

 

 

 

 

 

In response to the persistent fluctuations in the naira exchange rate, the Central Bank of Nigeria (CBN) has introduced a significant change, permitting banks to determine their own foreign exchange rates.

This move aims to enhance market dynamics, offering customers the opportunity to find competitive rates compared to the previous regulated system.

Dr. Omolara Omotunde, Director of the Financial Markets Department at the CBN, highlighted this development in a circular addressed to authorized dealers. The decision eliminates caps on interbank foreign exchange transaction spreads, empowering banks to establish prices based on supply and demand.

This market-driven approach is expected to facilitate quicker access to foreign currency for businesses and individuals. Moreover, the CBN emphasized the importance of transparency and ethical standards in FX transactions, urging banks to disclose prices clearly and report all dealings.

Additionally, the CBN seeks to attract foreign investment and stabilize the exchange rate through various measures, including unifying FX market segments and enforcing operational mechanisms for money transfer operators.

While challenges persist, such as increased demand pressures and speculative activity, the CBN remains committed to implementing strategies to enhance liquidity and minimize exchange rate volatility.

Central to this effort is the need for collective action to moderate demand for foreign currency, as emphasized by CBN Governor Olayemi Cardoso during a recent Senate briefing.

The CBN’s proactive stance, coupled with collaborative efforts, aims to foster a more stable and efficient foreign exchange market in Nigeria.

 

Credit: Nigerian Tribune

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