Nigeria’s Central Bank Announces Removal of Spread on Foreign Exchange Transactions

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In a significant move towards fostering a market-based price discovery system, the Central Bank of Nigeria (CBN) has directed the removal of any cap on the spread for interbank foreign exchange transactions. This directive is part of the ongoing foreign exchange market reforms, aimed at promoting transparency and efficiency within the market.

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Effective immediately, the CBN has lifted restrictions on the sale of interbank proceeds, emphasizing the shift towards a “Willing Buyer and Willing Seller” basis for foreign exchange transactions among Authorized Dealers. This decision aligns with the broader objective of encouraging a more dynamic and market-driven approach to pricing.

The directive also underscores the CBN’s commitment to upholding high ethical standards within the foreign exchange markets. Authorized Dealers are urged to prioritize transparency and appropriate price disclosures in their dealings, promoting a fair and open trading environment.

Furthermore, the CBN emphasizes the immediate recording of all executed transactions on relevant treasury systems. To ensure accountability and regulatory compliance, market authorities require these transactions to be promptly reported as stipulated.

This development signifies a notable step in the ongoing reforms by the CBN, reflecting the central bank’s dedication to enhancing the efficiency and competitiveness of the foreign exchange market in Nigeria. The removal of spread caps is expected to stimulate increased participation, improve market dynamics, and foster a more transparent and responsive foreign exchange ecosystem.

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