The naira surged significantly against the US dollar on Thursday, trading at N1640/$1 in the parallel market, marking a notable 5.2 per cent gain from the previous day’s rate of N1730/$1.
This remarkable appreciation is attributed to the introduction of the Enhanced Foreign Exchange Market System (EFEMS), a centralized trading platform launched by the Central Bank of Nigeria (CBN) to enhance transparency and regulatory oversight in the forex market.
The EFEMS platform consolidates Nigeria’s foreign exchange windows, including the erstwhile Investors and Exporters (I&E) forex Window, SME Window, and Invisible Window, into a unified trading system.
Designed to simplify operations and increase market transparency, EFEMS mandates that all forex transactions be conducted and priced through the system, with daily rates published for public access.
Market insiders reported strong trading activity on EFEMS during its initial days, with supply reportedly outstripping demand. At the parallel market, exchange rates for dollar inflows closed at N1640/$1, while cash transactions were slightly higher at N1664/$1.
Meanwhile, official market rates ranged from N1,595/$1 to N1,643/$1, depending on the trading session, according to the CBN website.
Financial experts have lauded EFEMS as a step in the right direction to address inefficiencies that have long plagued Nigeria’s forex market.
Dr. Adebola Adigun, an economist and forex market analyst, highlighted that the system’s transparency could help stabilize rates and reduce speculative trading.
“The unification of forex windows is a bold move that eliminates the arbitrage opportunities created by multiple windows. However, its long-term success hinges on maintaining sufficient liquidity and curbing speculative activities,” Adigun said.
Market analysts also noted that the immediate gain in the naira’s value reflects improved confidence among Bureau De Change (BDC) operators and market participants.
“The initial trading volumes on EFEMS suggest strong participation, which could set a foundation for greater liquidity,” said financial strategist Tunde Owolabi.
Despite the promising start, experts caution against premature optimism. Sustaining this momentum will require robust policy implementation, especially in ensuring a consistent supply-demand balance.
“While EFEMS simplifies the forex market, the CBN must tackle the underlying issues of forex scarcity and maintain the platform’s credibility to avoid a relapse into speculative trading,” noted investment analyst Aisha Suleiman.
The EFEMS rollout is part of a broader reform strategy outlined in the CBN’s updated guidelines for the Nigeria Foreign Exchange Market (NFEM), issued on November 29, 2024.
These guidelines redefine the roles of market participants, impose stricter compliance measures, and introduce a centralized pricing model to enhance regulatory oversight.
CBN Governor, Yemi Cardoso, emphasized the importance of these reforms during a recent press briefing. “Our objective is to create a transparent, efficient, and well-regulated forex market that supports economic stability and growth,” He said
