CBN Alters Rules For Selection Of Primary Dealers As New FX Regime Takes Off Today

As trading on the Nigeria Interbank Foreign Exchange (NIFEX), which allows the exchange rate of the naira to be market-driven commences today, the Central Bank of Nigeria (CBN) has moved to change the guidelines for the selection of FX Primary Dealers (FXPDs) who shall deal in wholesale forex transactions with the CBN.

Last Wednesday, the CBN had unveiled the guidelines for the commencement of a flexible exchange rate regime, adding that it would appoint eight to 10 primary dealers, whom the central bank Governor, Mr. Godwin Emefiele, referred to as “Grade A” dealers.

Others were classified as “Grade B”, whom the CBN termed as non-primary dealers, but shall remain valid and eligible to participate in the market.

It had also said interbank trading under the new guidelines would begin today, while tenors and rates for the naira-settled OTC FX Futures would be announced on June 27, 2016.

Under the guidelines for primary dealership in forex products, the CBN also stipulated that authorized dealers would be required to have a minimum shareholders’ fund unimpaired by losses of at least N200 billion, a minimum of N400 billion in total foreign currency assets, and minimum liquidity ratio of 40 per cent.

The names of the eight or 10 primary dealers were to be released by the CBN last Friday.

However, the segmentation of the market into “Grade A” and “Grade B” dealers by the CBN resulted in concerns that limiting the market to eight or 10 primary traders or banks with access to forex from the central bank could lead to the emergence of a cartel of favoured banks and price-fixing among them.

Credit: Thisday