All About CBN’s Electronic FX Trading System?

The Central Bank of Nigeria (CBN) has introduced the Electronic Foreign Exchange Matching System (EFEMS) to make foreign exchange (FX) trading more efficient and transparent. 

This new system went live recently, aiming to address Nigeria’s forex challenges and improve the country’s financial market operations. Here’s everything you need to know about EFEMS:

A platform for better trading

CBN has selected the Bloomberg B-Match system as the official platform for interbank FX trading. This platform enables authorised dealers, such as banks and financial institutions, to trade currencies more transparently.

To use the Bloomberg B-Match system, authorised dealers must:

• Acquire the necessary technology.
• Train their staff to operate the platform effectively.
• Follow all operational guidelines and standards.

The platform helps banks place anonymous orders into a central system. These orders are matched based on pre-set limits and trading rules, ensuring fair and transparent transactions.

Who Can Use EFEMS?

The EFEMS platform is open to:

1. Licensed Dealer Banks: Banks authorised by the CBN can participate automatically.
2. Other Participants: Non-bank players, such as large financial firms, can join if they receive CBN’s approval and meet all platform requirements.

Participants must keep their profiles accurate and up-to-date.

How EFEMS Operates

Initially, the system will only support trading between the US Dollar and the Naira. Other currencies may be added later. Here’s how it works:

• Minimum Trade Amount: Dealers can trade at least $100,000, with additional increments of $50,000.
• Anonymous Matching: Orders are placed and matched anonymously, ensuring no unfair advantage to any trader.
• Unmatched Orders: Any order not matched by the end of the trading day will expire and must be re-entered the next day.

When a trade is successfully matched, both the buyer and seller will receive transaction details for settlement.

Reporting and Data Requirements

Transparency is a top priority for EFEMS. To maintain this, the CBN requires:

• Daily Reporting: All FX transactions, including those conducted outside the platform, must be reported within 10 minutes of completion.
• Strict Compliance: Dealers must follow the Nigerian Foreign Exchange Code and other CBN guidelines. Non-compliance may lead to suspension or removal from the platform.

Why EFEMS matters

Nigeria is currently facing significant forex shortages, and speculative trading has worsened the situation. By launching EFEMS, the CBN aims to:

• Reduce speculation in the FX market.
• Increase transparency in FX transactions.
• Improve price discovery, so everyone knows the true market value of currencies.
• Enhance the efficiency of forex operations, making it easier for banks and businesses to access foreign exchange.

The EFEMS initiative represents a significant step towards creating a more stable and transparent FX market in Nigeria. With its advanced technology and strict guidelines, the system is expected to boost confidence in the market and contribute to a more robust economy.