Regulatory Alerts2017-04-21 | FMD/DIR/CIR/GEN/08/007Establishment of Investors and Exporters FX Window
The Central Bank of Nigeria (CBN) implemented the following major changes and additions to its foreign exchange policies in a circular released on April 24th, 2017. 1. The Investors & Exporters' FX Window was introduced as a new segment for the sale and purchase of Foreign Exchange to Authorised Dealers. 2. The NAFEX rate became the official exchange rate for transactions in the Investors & Exporters' FX Window. It replaced the CBN's previous rates, NAFEX/NIFEX and the Central Bank of Nigeria (CBN) retail window rate, which were used interchangeably in different circumstances. 3. The Nigerian Autonomous Foreign Exchange Fixing (NAFEFIX) was introduced as a new official exchange rate for transactions in the Investors & Exporters' FX Window and the CBN retail window. It was established to facilitate transparency and accountability in foreign exchange market operations. 4. The Central Bank of Nigeria Financial Markets Department issued guidelines for trading activities within the Investors & Exporters' FX Window. These included details on authorized dealers, eligible buyers and sellers, transaction conditions, and reporting requirements. 5. The CBN reiterated its commitment to monitoring and managing liquidity in the derivatives market through the Naira-settled OTC Foreign Exchange Futures market, which was to settle on NAFEX. 6. Finally, the circular provided a framework for settling outstanding Naira-settled OTC FX Futures contracts from April 2017 to March 2018. These contracts could either be settled at their respective NIFEX rates or at their respective NAFEX rates as chosen by the contract holders, with certain conditions and restrictions applied. These changes were introduced to improve efficiency, transparency, and stability in Nigeria's foreign exchange market, while also providing a framework for managing and resolving outstanding contracts.