Tuesday, July 26, 2016

CBN Orders Banks to Publish Details of Forex Transactions as Naira Depreciates

The Central Bank of Nigeria (CBN) has ordered banks to publish details of all foreign exchange (Forex) transactions on the Financial Market Dealers Quote (FMDQ) platform in a bid to guarantee the credibility of forex transactions.

The decision comes at a time when the Nigerian currency, the Naira, has depreciated by 1.5 percent (N4.5) at the interbank foreign exchange market for spot transactions.



According to the Vanguard, the exchange rate for the spot transactions went from N305.25 per dollar at the end of transactions on Friday to N309.84 per dollar at the close of business on Monday.

For forex transactions at the parallel market, however, the Naira is said to have remained relatively stable at N376 per dollar.

In an email announcing the CBN directive on forex tranactions, managing director/chief executive of the FMDQ, Mr Bola Onadele said, “Banks should update all trades irrespective of the exchange rate.”

“The CBN is very interested in credible price formation for the spot foreign-exchange market. It is also imperative for price discovery and liquidity assessment of our market, which are key to activate foreign portfolio investment flows,” he said.

A subsequent email to clarify the directive on the forex transactions also mandated banks to publish all their so-called “off-line trades” on the FMDQ trading system “within 30 minutes of execution of such transactions.”

Market observers state that the Naira fell 3.9 percent, the most since the devaluation, to 305.25 on July 22nd and rose 2.9 percent to 296.75 by 2:38 pm in Lagos on Monday.

One of the touted benefits of the Naira devaluation was the attraction of foreign investment but analysts say Nigeria has struggled to attract foreign money into its bond and equity markets since the devaluation.

The CBN had devalued the Naira by 30 percent on June 20, ending a 16-month peg of 197-199 per dollar. Analysts however say investors remain skeptical because the apex bank appeared to still be controlling the exchange rate.

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