Cbn introduces 250m forex market
You're referring to the recent development by the Central Bank of Nigeria (CBN) to introduce a 250 million US Dollar foreign exchange (forex) market.
Here's a brief summary of the development:
Background: The CBN has been implementing various measures to stabilize the naira and improve the country's foreign exchange market. In recent times, the naira has been under pressure due to a decline in oil prices, a widening trade deficit, and a surge in demand for foreign exchange.
New initiative: To address these challenges, the CBN has introduced a new foreign exchange market, known as the "Invisible Market" or "Nigerian Autonomous Foreign Exchange Fixing (NAFEX) Market". This market is designed to provide a more transparent and efficient way of trading foreign currencies in Nigeria.
Key features:
- 250 million US Dollar daily trading limit: The NAFEX market will have a daily trading limit of 250 million US Dollars, which is expected to help stabilize the market and prevent excessive volatility.
- Electronic trading platform: The market will operate on an electronic trading platform, which will enable participants to trade foreign currencies online.
- Multiple banks and financial institutions: The market will be open to multiple banks and financial institutions, including commercial banks, merchant banks, and other financial institutions.
- Fixed exchange rate: The exchange rate in the NAFEX market will be fixed, which means that the value of the naira will be pegged to the US Dollar at a fixed rate.
- No restrictions on foreign exchange transactions: The NAFEX market will not have any restrictions on foreign exchange transactions, which means that individuals and businesses will be able to buy and sell foreign currencies freely.
Benefits: The introduction of the NAFEX market is expected to bring several benefits, including:
- Improved transparency: The electronic trading platform will provide a transparent and efficient way of trading foreign currencies.
- Increased liquidity: The market will provide an additional source of foreign exchange, which will help to increase liquidity and reduce the pressure on the naira.
- Stabilization of the exchange rate: The fixed exchange rate will help to stabilize the value of the naira and reduce the risk of excessive volatility.
- Increased foreign investment: The NAFEX market is expected to attract more foreign investment into Nigeria, which will help to boost economic growth and development.
Overall, the introduction of the NAFEX market is a positive development for Nigeria's foreign exchange market, and it is expected to bring several benefits to the economy.