Regulatory Alerts2011-10-20 | TED.FEM.FPC.GEN.01.025Guidelines on the Operations of CBN Interventions in the Inter-Bank Market through the Two-Way Quote System
The Central Bank of Nigeria (CBN) has introduced two-way quote systems for its interventions in the interbank market, as part of ongoing efforts to maintain stability in foreign exchange markets. These new intervention methods are aimed at strengthening market integrity and promoting effective transactions between authorized dealers. Under Method A, CBN will buy or sell USD based on quotes submitted by Authorised Dealers within a maximum spread of 20 pips (0.20 NGN). In Method B, the CBN may directly contact dealers for quotations for a standard trade amount of $250,000 with a bid-offer spread of only 5 pips (0.05 NGN). Funds purchased through these interventions can be applied to eligible transactions and are credited to authorized dealers' Trading Nostro Accounts. The CBN will operate on a settlement risk basis, and failure to settle transactions according to the guidelines may result in suspension from participating in WDAS-SPT and WDAS-FWD, as well as interest charges based on the provisions of the Nigerian Master Agreement for Foreign Exchange Transactions. These new guidelines are effective immediately.