The Central Bank of Nigeria (CBN) has made a significant decision to allow banks in the country to determine and set their own exchange rates for foreign currency transactions. This move was announced by Dr. Omolara Omotunde, Director of the Financial Markets Department of the CBN, in a circular addressed to all authorized dealers.
The circular, numbered FMD/DIR/PUB/CIR/001/012, stated that the CBN has decided to remove any caps on the spread on interbank foreign exchange transactions and eliminate restrictions on the sale of interbank proceeds. This means that banks now have the freedom to establish their own exchange rates based on market supply and demand dynamics.
This development allows the foreign exchange market to operate more freely, allowing market forces to determine what constitutes a fair exchange rate, particularly for the US dollar. As a result, businesses and individuals may experience quicker and more convenient access to foreign currency.
Authorized dealers are instructed to continue conducting foreign exchange transactions on a ‘Willing Buyer and Willing Seller’ basis, and they are expected to adhere strictly to high ethical standards in their dealings. This includes providing transparent price disclosures and ensuring transparency in all transactions.
The CBN emphasized the importance of transparency and accountability, urging banks to clearly display their prices, refrain from deceptive practices, and report all transactions to the CBN. The central bank also stated its commitment to monitoring the market and making necessary adjustments as needed.
Overall, the CBN expects that this new approach will promote fairness and efficiency in the foreign exchange market, eliminate artificial distortions, and ensure that everyone can access foreign currency at reasonable prices.