CBN sets $100,000 minimum trade limit on new electronic FX platform
Onome Amuge
The Central Bank of Nigeria (CBN) has set a new minimum trade size of $100,000, with increments of $50,000, for all foreign exchange (FX) transactions conducted on the Electronic Foreign Exchange Matching System (EFEMS) platform.
In a recent directive to banks, the CBN stated that the Bloomberg BMatch system will be deployed as the EFEMS for FX market trading activities effective December 2nd, 2024.
The CBN’s EFEMS guidelines further stipulated that participants must establish credit and settlement limits for their counterparties in the system. This measure aims to ensure that all FX transactions conducted on the platform stay within agreed-upon credit limits, with any transaction exceeding these limits automatically rejected.
The CBN’s guideline, presented in a circular to all banks in the interbank forex market and signed by Omolara Duke, the director, financial markets department, stated, “The minimum tradable amount is $100,000.00, with incremental clip sizes of $50,000.00.
“Participants must set credit and settlement limits for other counterparties in the system. Transactions exceeding these limits will not be executed.”
The CBN’s EFEMS guidelines stipulate that only institutions authorised by the apex bank to participate in Nigeria’s interbank FX market can qualify as participants. These institutions, known as authorised dealers, will access the EFEMS platform using unique dealing codes assigned by Bloomberg Launch Pad.
The EFEMS system will initially operate exclusively for spot FX transactions involving the Naira (NGN) and the US Dollar (USD). The CBN has left the door open for the possible introduction of other currency pairs, pending further directives.
The CBN stressed the role of accountability in the FX market, mandating participants to set and maintain credit and settlement limits for their counterparties, including the CBN.
To further reinforce market accountability, the circular emphasised that all trades executed on EFEMS are binding, unless canceled by mutual agreement of both parties with written approval from the CBN.
The CBN’s guidelines acknowledge the possibility of platform issues and provide guidance on how to address these eventualities. Should issues arise with EFEMS, the system provider is mandated to offer real-time support. If prolonged downtime is experienced, alternative trading protocols will be activated, ensuring market operations continue without disruption.
Participants seeking to withdraw from the platform are expected to provide written notice to the CBN, giving a minimum 30-day notice and fulfilling all obligations before exiting.