Overview of the Recent FX Reforms

1. Launch of EFEMS

The Electronic Foreign Exchange Matching System (EFEMS) was introduced in December 2024. This system mandates that all FX transactions occur through a digitized platform approved by the CBN.

Features of EFEMS:

• Real-time price reflections.

• Centralized transaction reporting for better regulatory oversight.

• Enhanced transparency and reduction of speculative trading.

This system addresses inefficiencies in the previous FX mechanisms, ensuring governance and market-driven pricing .

2. Liberalization of the FX Market

The CBN consolidated multiple FX windows into a unified “Willing Buyer, Willing Seller” market model. This allows rates to be determined by supply and demand, minimizing distortions caused by previous dual or multiple exchange rate regimes .

Impact of the Reforms

• Improved Transparency and Governance

  With EFEMS, the CBN now monitors all interbank transactions closely, providing real-time updates and ensuring compliance with market rules.

• Stabilization of the Naira

  Since these reforms were implemented, the naira has shown signs of stabilization. For instance, the naira appreciated to N1,640 per dollar from N1,730 in the parallel market due to increased market liquidity .

• Attracting Foreign Investments

  The reforms aim to create an investor-friendly environment by reducing uncertainty and promoting fair market practices. This is critical for boosting foreign direct investment (FDI).

Challenges and Considerations

• Market Volatility

  While reforms bring long-term benefits, the initial transition may cause volatility. The CBN must manage this carefully to maintain investor confidence.

• Bureau De Change (BDC) Adjustments

  New guidelines require higher capital requirements for BDC operators, which could strain smaller operators but ensure market integrity in the long run .

Conclusion

The CBN’s FX reforms are a step towards creating a more transparent, efficient, and stable foreign exchange market in Nigeria. While challenges remain, these measures have the potential to enhance economic growth, attract investments, and stabilize the naira.