CBN flags off Naira Settlement System

The Central Bank of Nigeria (CBN) has formally flagged off the Naira Settlement Foreign Exchange Market on Monday, June 27, 2016 in Lagos.
This is even as naira-dollar exchange rate on Monday ended at N282 to the dollar, slightly weaker than Friday’s close of N281 after the central bank’s intervention,
A Bureau De Change (BDC) operator Harrison of H.J investment BDC  confirmed that the local currency firmed from N335/$ rate to N330/$ on the black market as more buyers prefer to purchase from authorised dealers rather than the black marketers.
Also, the British Pounds he said, exchanged for N445 to a pound as against N500 the previous week and Naira exchanged for N370 to a Euro  at the parallel market.
Nigeria’s central bank asked for bid-offer quotes from currency traders on Monday as  the apex bank sold dollars on the interbank market to boost liquidity, traders said.
It sold an undisclosed amount of dollars on Monday. However, the interbank market traded a total volume of $32 million just before the market closed which traders attributed to central bank’s intervention.
Currency traders on Monday said they had tightened the differential between bids and offers to N0.5  from one naira set when the currency was floated last week, to try to boost trading and attract liquidity.
Prior to old exchange rate peg, the currency market traded on N0.5  spreads, they said.
Speaking at the historic Naira Settlement launch, the Governor of the Central Bank of Nigeria, Godwin Emefiele, expressed delight that the foreign exchange market in Nigeria has attained the this position where participants in Nigeria can settle foreign exchange futures transactions in naira.
According to Emefiele, who was represented by the Special Adviser, Financial Market, Emmanuel Ukeje, “this product is novel in Nigeria and it gives comfort regardless of the price at which you have quoted to buy foreign exchange in Nigeria.” In the same vein, the product is also expected to provide relief to Nigerians seeking Dollars to import critical machinery and raw materials from abroad as they can now lock-in their foreign exchange deals in earnest against their future demands.
He reaffirmed the commitment of the apex Bank to ensure the success of the news foreign exchange market structure and also promised to honour all obligations arising from future deals.
In his speech at the epoch making event, the Managing Director of the Financial Market Dealers Quote, Bola Onadeko urged the regulators of the financial markets to strive for the success of the of this new foreign exchange initiative by ensuring desired liquidity.
Earlier in her welcome address, the Chariperson of the FMDQ, Dr Sarah Alade, represented by Mr Yinka Sani of Stanbic IBTC, noted that the launching of the hedging product has revolutionized the financial landscape in Nigeria as the market is now adequately positioned among the global standards and at same time provide liquidity for the market. She gave an assurance that FMDQ would ensure transparency and innovations in order to attract investor to Nigerian market.
The Naira-settled OTC Future are non-deliverable forwards where by parties to a contract agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying United States Dollars on maturity or settlement date but only required to settle exchange rate differentials in Naira.