The Central Bank of Nigeria’s (CBN) newly implemented foreign exchange market system has been credited with sparking an unprecedented surge in the value of the Naira against major global currencies. The Electronic Foreign Exchange Matching System (EFEMS), operational since December 2, 2024, has changed forex trading dynamics with increased market awareness and quick settlements.
According to a CBN directive, banks are now mandated to utilize the Bloomberg BMatch system for real-time forex trading. The central bank emphasized its commitment to ensuring compliance, stating that it will “deploy its regulatory power to enhance the implementation of this directive and reserves the right to impose sanctions when necessary.”
For the first time since May 2024, the Naira recorded five consecutive days of appreciation across all segments of the forex market. By the weekend, the currency closed at N1,535/$1 in the official Nigerian Foreign Exchange Market (NFEM) and N1,555/$1 in the parallel market, marking a significant improvement.
This also narrowed the gap between the official and parallel market rates to just N20/$1, down from the N118/$1 differential recorded the previous week.
A senior banking executive said: “The new system seems to be achieving its goal as you get a real-time feel of the market. Trades are being matched efficiently, and market transparency has improved significantly. Since its launch, the Naira has appreciated, aided by CBN interventions through the system. While it’s early days, there is potential for sustained market equilibrium.”
The impact has been tangible. Data from the NFEM indicates that the Naira gained N168 (9.8%) last week alone, rising from N1,720/$1 to N1,555/$1 in the parallel market. This marks the currency’s largest weekly gain in 2024.
The Naira had been on a downward trajectory throughout 2024, plummeting from N907/$1 in January to N1,730/$1 by October in the official market. However, the introduction of EFEMS reversed this trend, with rates climbing back to the N1,600 range in November. The parallel market witnessed an even sharper recovery, where the exchange rate fell from N1,775/$1 at the end of November to N1,500/$1 in early December.
Parallel market operators, who have traditionally dictated exchange rate dynamic are now complaining of a glut in dollars and unexpected losses. Yakubu Giwa, a black market trader, explained that the Naira’s appreciation has created a glut of dollars in the market. “Many traders are struggling to sell their inventory as individuals rush to exchange their dollars, fearing further losses”, he said.
Giwa attributed some of the Naira’s strength to seasonal factors, including increased remittances from Nigerians in the diaspora during the festive period.
Another trader, Umoru Yahaya, said the Naira’s is also gaining against the pound sterling and euro. Commodity prices are also dropping – gold has fallen from N150,000/gram two weeks ago to N115,000/gram, while silver now trades at N20,000/gram, down from N50,000/gram.
The introduction of EFEMS has demonstrated its potential to restore confidence and stability in Nigeria’s forex market. With a reduced spread between the official and parallel rates and a more transparent trading platform, the system could lay the foundation for sustained currency appreciation and macroeconomic stability.
