Cbn orders major forex market overhaul as naira depreciates further
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CBN Orders Major Forex Market Overhaul as Naira Depreciates Further
The Central Bank of Nigeria (CBN) has announced a major overhaul of the foreign exchange (forex) market in response to the continued depreciation of the naira. The move is aimed at improving the efficiency and transparency of the market, as well as stabilizing the value of the naira.
Key Changes
- Introduction of a new forex market structure: The CBN will introduce a new market structure that will separate the interbank and bureau de change (BDC) segments. This will allow for more efficient allocation of foreign exchange and reduce the impact of speculation on the market.
- Increased transparency: The CBN will publish daily forex market data, including the exchange rate, volume of transactions, and the composition of the market. This will increase transparency and accountability in the market.
- Improved liquidity: The CBN will increase the amount of foreign exchange available in the market, which will improve liquidity and reduce the impact of supply and demand imbalances.
- New forex allocation mechanism: The CBN will introduce a new mechanism for allocating foreign exchange to BDCs, which will ensure that the allocation is more transparent and efficient.
- Increased surveillance: The CBN will increase its surveillance of the forex market to detect and prevent illegal activities, such as currency manipulation and round-tripping.
Reasons for the Overhaul
The CBN has been under pressure to address the continued depreciation of the naira, which has been driven by a combination of factors, including a large trade deficit, a decline in oil prices, and a lack of confidence in the economy. The overhaul is aimed at restoring confidence in the economy and stabilizing the value of the naira.
Impact on the Economy
The overhaul is expected to have a positive impact on the economy, including:
- Improved confidence: The increased transparency and accountability in the forex market will improve confidence in the economy and attract foreign investment.
- Stabilized exchange rate: The overhaul is expected to stabilize the value of the naira, which will reduce the impact of currency fluctuations on the economy.
- Increased economic activity: The improved liquidity and increased allocation of foreign exchange will increase economic activity and stimulate growth.
Overall, the CBN's overhaul of the forex market is a positive step towards restoring confidence in the economy and stabilizing the value of the naira.