CBN Sets Up Investors, Exporters Forex Window

April 21, 2017
Customers Forex Demands

CBN Sets Up Investors, Exporters Forex Window

By Modupe Gbadeyanka

A special window for investors, exporters and end-users to easily access the foreign exchange market has been established by the Central Bank of Nigeria (CBN).

This, the apex bank explains, is aimed at deepening the forex market and accommodates all forex obligations.

The CBN further said the purpose of this window is to “boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.”

Under the new regime, transactions allowed are all invisibles, excluding international airlines ticket sales’ remittances; loan repayments; loan interest payments; dividends/income remittances; capital repatriation; and management services fees.

Others are consultancy fees, software subscription fees, technology transfer agreements, personal home remittances and any such other eligible invisible transactions including ‘miscellaneous payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual.

According to the CBN, the supply of foreign currency to the “window shall be through portfolio investors, exporters, authorised dealers and other parties with foreign currency to exchange to Naira.

“The CBN shall also be a market participant at this Window to promote liquidity and professional market conduct.”

The apex bank explained that due to the slow progress made by corporates in on-boarding the FMDQ Thomson Reuters FX Trading & Auction Systems, participants at this window shall trade via telephone until appreciable progress is made with the FX Trading Systems On-boarding process.

“Authorised Dealers are therefore advised to promote market transparency by encouraging their corporate clients to on-board to ensure the activities of the Window are operated on the FX Trading Systems.

“Participants are advised to ensure that all trade conversations are recorded and auditable.

“Consequently, to provide price discovery to the market, FMDQ OTC Securities Exchange (FMDQ) shall be charged with polling buying and selling rates and other relevant information from the major participants in the market to provide participants with the requisite price discovery, and the CBN with the indicative market depth until the market migrates to the FX Trading Systems.

“Therefore, FMDQ shall publish on its website (wvw.fmdqotc.com) market rates and any other relevant information twice daily (Indicative Opening Mid-Rate at 9am and Indicative Closing Mid-Rate at 4am),” the bankers’ bank said in a statement on Friday and signed by the Director of Financial Markets Department, Mr Alvan Ikoku.

It stressed that the exchange rates of the transactions in the window shall be as agreed between authorised dealers and their counterparties (i.e. willing buyer and willing seller basis).

“The CBN reserves the right to intervene as a buyer or seller, as it deems fit, in the Window.

“Authorised Dealers may hold positions subject to their respective Foreign Currency Trading Position Limits (FCTPL).

“Authorised Dealers shall not exceed their respective FCTPL without the approval of the CBN. Compliance with the FCTPL shall be strictly monitored by the CBN.

“Where an Authorised Dealer has a foreign currency trading position in excess of its limit, it is expected that such excess shall be defeased during trading hours. The Authorised Dealer shall offer the funds to the CBN or to another Authorised Dealer but with the prior express approval of the CBN.

“Where such funds are sold to other Authorised Dealers, the purchased funds shall only be sold by the buying Authorised Dealer to its customers. An attestation of this compliance must be provided by the buying Authorised Dealer to the selling Authorised Dealer.

“The funds purchased cannot be held in position overnight by the buying Authorised Dealer or sold to another Authorised Dealer.

“Information on transactions between Authorised Dealers shall be reported to the CBN on a daily basis,” the CBN said further.

It added that, “Authorised Dealers shall render daily returns (hard and soft copy, in a format to be communicated by the CBN) of all transactions in this market to the Directors, Financial Markets and Banking Supervision Departments, Central Bank of Nigeria.”

Modupe Gbadeyanka

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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