In response to one of the commitments of the last Monetary Policy Committee (MPC) meeting, the Committee of the CBN has, highlighted the followings regarding the much awaited introduction of the flexible foreign exchange market.
Key notes are,
1. Market shall operate as a single market structure via the interbank market and authorized dealers.
2. Purely an exchange rate market managed via Thompson Reuters platform,
3. CBN will participate via periodic intervention.
4. CBN will introduce primary dealers that deal with CBN on a two way quote basis.
5. Primary dealers to deal with other players in the interbank market.
6. There shall no pre-determined spreads on forex transactions and all forex purchases are transferable
7. 41 items shall remain inadmissible in the forex market for forex transactions
8. The CBN will offer long term forex futures
9. Sale of forex forwards for end users must be trade-backed
10. Introduce non deliverable OTC forex settled trades to help moderate volatility
11. The OTC settled forex feature shall be on non-standardized amounts,
12. Proceeds of forex shall be purchased by authorized dealers at the daily interbank rates.
CBN agreed that
1. Details of the operational guideline to be released immediately after this meeting
2. Primary dealers operational guidelines to be also released immediately
3. Selected dealers to be notified on Friday
4. Interbank trading will begin on Monday June 20 and tenors and rates for OTC settled forex feature to be announced June 20.
The Governor noted that national reserve is higher than pent up demand in the market and all maturing LCs will be moved to the interbank market for clearance.