by Kayode Tokede, Lagos
The Central Bank of Nigeria (CBN) has said all inter-bank foreign exchange transactions is subjected to a maximum spread of N1.00. The CBN in a circular to all authorized dealers signed by director, Financial Market Department, CBN, Dr. Alvan Ikoku stressed that authorized dealers must not exceed their respective Foreign Currency Trading Position Limit (FCTPL) without CBN’s approval.
The circular issued on Monday night to all authorized dealers also stated that CBN reserves the right to intervene, as a buyer or seller, as it deems fit in the inter-bank market. According to the circular, “The Central Bank of Nigeria (CBN), in its effort to further develop the Nigerian foreign market continues to embark on initiatives that serve to improve the foreign exchange market structure.
“Consequently, further to the CBN circular referenced FMD/DIR/CIR/GEN/08/007 dated April 21, 2017 on the Establishment of the Investors’ & Exporters’ (I&E) FX window, the CBN hereby issues the following directives. Authorised dealers may defeasance their excess foreign currency trading positions to other authorized dealers without seeking prior approval from the CBN. All inter-bank transactions shall be subject to a maximum spread of N1.00.
“Funds purchased by an authorized dealer from another authorized dealer, in the Inter-bank market, shall not be held in position overnight by the buying authorized dealer or sold to another authorized dealer. Such Inter-bank purchase shall only be sold by the buying authorized dealer to its customers from Permitted/Eligible Transactions as outlined in the above-referenced circular. All documentation requirements for Permitted Transactions shall apply.
“Authorized dealers shall not exceed their respective Foreign Currency Trading Position Limited (FCTPL) without the approval of the CBN. Compliance with the FCTPL shall be monitored by the CBN. “All inter-bank trades- spot, forwards, futures, options and swaps- that have an impact on an authorised dealer’s FCTPL are expected to comply with rate reasonability standards. The CBN reserves the right to intervene, as a buyer or seller, as it deems fit in the inter-bank market.