Nigeria: Updated foreign exchange policy

Nigeria: Updated foreign exchange policy

The Central Bank of Nigeria in June 2016 announced a “flexible” foreign exchange policy.

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The foreign exchange market will now operate as a single market through the Interbank Foreign Exchange Market (IFEM).  Participants in the IFEM will include authorised dealers, authorised buyers, oil companies, oil service companies, exporters, end-users and any other entity as designated by the Central Bank from time to time.

Authorised dealers are now permitted to buy and sell foreign exchange among themselves on a two-way quote basis via any system approved by the Central Bank of Nigeria. Exchange rates will now be determined by market forces, and there will not be any spread restrictions.

  • The applicable exchange rate for the purpose of import duty payments will be the daily IFEM foreign exchange closing rate.
  • Proceeds of foreign investment inflows and international monetary transfers will be be purchased by authorised dealers at the IFEM.
  • The Central Bank will participate in the IFEM through periodic direct interventions or dynamic “secondary market intervention mechanisms.”
  • Primary dealers will be registered to deal directly with the Central Bank for “large deal” sizes on a two-way quote basis. These dealers, to be appointed and notified by Friday, 17 June 2016, will operate with other authorised dealers.
  • The 41 items listed as “not valid for foreign exchange” in a Central Bank circular (23 June 2015) will remain ineligible for foreign exchange on the IFEM.
  • The Central Bank may offer long-tenor foreign exchange forwards to authorised dealers.
  • Sale of foreign exchange forwards must now be trade-backed, and with no pre-determined spread.
  • Over-the-counter foreign exchange futures will be introduced. 
  • Non-oil exporters are now allowed unfettered access to their foreign exchange proceeds, which will be sold on the IFEM.
  • IFEM trading under the new guidelines will begin on Monday, 20 June 2016. 

 

Read a June 2016 report [PDF 86 KB] prepared by the KPMG member firm in Nigeria

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