Banks free to fix forex rates – CBN

The Central Bank of Nigeria (CBN) on Friday gave the commercial banks the nod to sell foreign exchange at rates determined by them, as part of the strategy by the apex bank to stabilise the naira.

The Director, Financial Markets Department of the CBN, Dr. Omolara Omotunde, said in a circular FMD/DIR/PUB/CIR/001/012 addressed to “All Authorized Dealers”, that the apex bank had decided to discontinue “any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.”

Consequent upon the removal of the caps on the spread on interbank foreign exchange transactions, the banks are now free to establish their own prices based on supply and demand.

This allows the market to determine what it considers a fair rate for foreign currencies, particularly the US dollar.

But the CBN is demanding transparency from the banks, requiring them to clearly display their prices, refrain from deceiving customers, and report all transactions to it (CBN).

The CBN said Authorized Dealers are to continue to conduct their foreign exchange transactions on a ‘Willing Buyer and Willing Seller’ basis and are to “strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but not limited to adopting appropriate price disclosures and transparency for transactions”.

The banks now have more flexibility to sell FX to anyone they choose, and this change could result in a quicker and more convenient access to foreign currency for businesses and individuals.

The CBN said Authorized Dealers are to continue to conduct their foreign exchange transactions on a ‘Willing Buyer and Willing Seller’ basis and are to “strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but not limited to adopting appropriate price disclosures and transparency for transactions”.