Forex: CBN creates special window for investors, exporters

Central Bank of Nigeria (CBN)
Central Bank of Nigeria (CBN)

The Central Bank of Nigeria, CBN, on Friday opened a special foreign exchange window for investors and exporters.

Tagged: “Investors’ & Exporters’ FX Window”, CBN’s Director in charge of Financial Markets, Alvan Ikoku, said the new window would boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

Investors in small businesses and exporters have always decried the closure of several investments due to lack of access to foreign exchange to procure necessary facilities to support their operations.

Two weeks ago, the Central Bank opened a special window for small and medium enterprises, SMEs, to facilitate the importation of eligible finished and semi-finished items.

But, Mr. Ikoku said in a circular that eligible transactions to be covered under the new window included invisible transactions, such as loan repayments, loan interest payments, dividends/income remittances, capital repatriation, management service fees and consultancy fees.

Also covered by the forex window include software subscription fees, technology transfer agreements, personal home remittances, bills for collection and any other trade-related payment obligations at the instance of the customer.

Other eligible transactions, like ‘miscellaneous payments’ detailed under Memorandum 15 of the CBN foreign exchange manual, were also covered under the new window.

Also, transactions and bills for collection were eligible to purchase foreign currency sourced from the CBN forex window limited to secondary market intervention sales, wholesale (spot and forwards) only.

The only item excluded under the new window was international airlines ticket sales’ remittances, which would only be eligible to access the CBN FX window.

“Supply of foreign currency to the new window shall be through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira,” the statement said.

“The CBN shall also be a market participant at the window to promote liquidity and professional market conduct.”

Considering the slow progress by corporates in on-boarding the Financial Markets Dealers Quotes Over-The-Counter, FMDQ OTC Securities Exchange, Thomson Reuters FX Trading & Auction Systems, the CBN said participants at the new window would trade via telephone until appreciable progress was made with the FX trading systems on-boarding process.

Authorized dealers were therefore advised to promote market transparency by encouraging their corporate clients to come on-board to ensure the activities of the window are operated on the forex trading systems.

To provide price discovery to the market, the CBN said the FMDQ would be charged with polling buying and selling rates and other relevant information from the major participants in the market to provide participants with the requisite price discovery, and the CBN with the indicative market depth until the market migrates to the FX Trading systems.

As part of the operational requirements of the window, the CBN said the exchange rates of the transactions would be as agreed between authorized dealers and their counterparties.

Besides, it said the CBN reserved the right to intervene as a buyer or seller, as it deems fit, in the window, adding that information on transactions between authorized dealers shall be reported to the CBN on a daily basis.


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