Key Points
- The naira recovers by 18.8% in the parallel market.
- CBN implements Bloomberg BMatch system to boost FX transparency.
- New trading guidelines streamline operations with set trade limits.
As traders dumped dollars in reaction to the Central Bank of Nigeria’s new foreign exchange framework, the naira strengthened to 1,515 per dollar on Friday in the black market, also referred to as the parallel market.
Naira rebounds in parallel market, recovering from record lows
Prior to the policy’s implementation, on November 21, the currency had fallen to a record low of 1,755 per dollar. Since then, it has recovered 18.8%, or 240, to reach its current black market rate.
According to data from the central bank, the naira also increased on the official market, climbing 2.08%, or 32, with the dollar quoted at 1,535 on Friday as opposed to the Nigerian Foreign Exchange Market’s closing rate of 1,567 on Thursday.
The enhancement comes after the central bank ordered all banks participating in the interbank foreign currency market to switch to the Bloomberg BMatch trading system on November 26.
New trading guidelines aim for transparency and efficiency in FX market
The platform, which went live on December 2, aims to increase the FX market’s operating efficiency and transparency. Omolara Duke, the director of the central bank’s financial markets division, sent a circular to banks stating that the Bloomberg BMatch system employs automated trade matching to improve price discovery and market integrity.
The Bloomberg BMatch system shows that the naira has improved from 1,672.69 on Nov. 29, the last trading day of the month, to 1,535 after the platform went live, an 8.97% increase, or 137.69.
The central bank released instructions for the Electronic Foreign Exchange Matching System, which is the interbank foreign exchange trading system, last week in an effort to further streamline operations.
According to business day, In order to promote increased efficiency and transparency in the FX market, the guidelines establish a minimum tradable quantity of $100,000 with incremental clip sizes of $50,000.
