…overhauls fx market rules, issues new guidelines
By Charles Ebi
Central Bank of Nigeria ,CBN, has outlined key initiatives for 2025 aimed at advancing the country’s financial services sector.
Speaking at the Bankers’ Committee Annual Dinner held on November 29, 2024, CBN Governor Olayemi Cardoso revealed plans to implement the open banking framework, promote contactless payment systems, and expand the regulatory sandbox.
These initiatives, he noted, are central to deepening financial inclusion and enhancing Nigeria’s payment ecosystem.
“In 2025, we will prioritize initiatives including implementing our open banking framework, advancing contactless payment systems, and expanding our regulatory sandbox.
Additionally, we will issue revised guidelines for agency banking and continue to strengthen electronic payment channels”.
Cardoso highlighted the implementation of the open banking framework as a top priority for the coming year.
Open banking, which enables secure sharing of financial data between banks and third-party service providers, is expected to spur innovation and create new opportunities within the financial technology ,fintech, space.
With open banking gaining traction globally, Nigeria’s adoption of this framework is anticipated to catalyze the development of new financial products, improve service delivery, and enhance customer experience across the industry.
Advancing Contactless Payments: As part of its vision for a more seamless payment system, the CBN plans to advance contactless payment solutions in 2025.
Cardoso emphasized the need to align with global trends, where contactless payment systems are fast becoming the norm for retail transactions.
The initiative is expected to drive the adoption of modern payment technologies, reduce transaction times, and promote cashless transactions, particularly among Nigeria’s growing youth and tech-savvy population.
Regulatory Sandbox for Innovation: Cardoso also announced plans to expand the CBN’s regulatory sandbox, a controlled environment where fintech companies can test innovative products under the supervision of the regulator.
The sandbox expansion is expected to encourage startups and established financial institutions to experiment with novel solutions in areas such as blockchain, artificial intelligence, and digital currencies.
Another priority area for the CBN in 2025 is bolstering the robustness of Nigeria’s electronic payment infrastructure.
Cardoso stressed the importance of strengthening these channels to support a more cashless economy and ensure resilience against cyber threats.
The CBN will also issue revised guidelines for agency banking, a critical tool in extending financial services to underserved and rural communities. Cardoso explained that these updates are aimed at enhancing the operational efficiency and security of agency banking networks, ensuring they remain a reliable channel for financial inclusion.
The outlined initiatives align with the CBN’s broader vision of fostering a modern, resilient, and inclusive financial system. By prioritizing innovation, regulatory advancements, and infrastructure upgrades, the apex bank seeks to position Nigeria as a leader in digital finance within Africa.
However the apex banks has released revised guidelines for the Nigeria Foreign Exchange Market ,NFEM, signaling a major shake-up in the country’s FX operations.
The updates, contained in a circular dated November 29, 2024, consolidate all FX windows, redefine the roles of market participants, and introduce stricter compliance and transparency measures.
This latest move is part of the apex bank’s efforts to address long-standing inefficiencies in the FX market while creating a transparent, well-regulated system.
The revised guidelines cover a wide range of regulatory and operational aspects, touching on the roles of Authorized Dealers, Bureaux de Change ,BDCs, pricing mechanisms, interbank trading, compliance, and reporting standards.
One of the most significant changes in the revised guidelines is the inclusion of licensed Bureaux de Change ,BDCs, in the official FX market.
For the first time in years, BDCs are now allowed to buy FX directly from Authorized Dealers, subject to a monthly cap set by the CBN.
The decision is expected to improve retail FX access, particularly for individuals and small businesses.
However, the CBN emphasized that all transactions involving BDCs must align with their licensing terms and be reported in real time.
In a bid to simplify operations and improve price discovery, the CBN has unified all FX market windows into a single framework.
This consolidation replaces the fragmented system of multiple windows, such as the Investors & Exporters ,I&E, FX Window, SME Window, and Invisible Window.
“By bringing all participants into a unified market structure, we are reducing inefficiencies and enabling better access to FX for legitimate needs”, the CBN noted in the circular.
This consolidation is expected to reduce market distortions and provide clearer guidance for participants.
Centralized Pricing through EFEMS- Pricing transparency is another focus of the revised guidelines as all FX transactions are now required to be priced through the Electronic Foreign Exchange Matching System ,EFEMS, a centralized platform that will also publish daily FX rates for public access.
To prevent exploitation, the CBN has prohibited negotiations of FX rates outside the market framework.
Authorized Dealers are required to maintain a transparent pricing methodology that aligns with the prevailing NFEM rate.
Stricter Reporting and Compliance Rules – The new guidelines also introduce rigorous reporting requirements
Authorized Dealers must report FX transactions to the CBN within 10 minutes via an API-based system.
BDCs are required to submit daily activity reports through automated portals.
Commercial and Merchant Banks must adopt real-time reporting to improve monitoring and oversight.
In addition, all market participants are expected to adhere to the Nigerian FX Code of Ethics and Conduct. Bank boards, CEOs, and Chief Compliance Officers are required to annually attest to their compliance with this code.
The CBN is also formalizing interbank trading as Authorized Dealers are now required to do the following
Provide two-way quotes as designated Market Makers to ensure liquidity.
The revised guidelines for the Nigeria Foreign Exchange Market ,NFEM, introduce several changes that distinguish them from the previous frameworks. Below is a comparison highlighting key differences.
For Businesses and Individuals – The inclusion of BDCs is expected to improve access to FX for retail users, while centralized pricing through EFEMS ensures more transparency in rates.
However, stricter compliance requirements may limit the operations of non-licensed intermediaries.
For Market Participants Authorized Dealers, BDCs, and other participants will need to upgrade their processes to meet real-time reporting and transparency requirements.
The annual ethics attestation highlights the CBN’s commitment to holding participants accountable.
The consolidation of the FX market is expected to enhance investor confidence and attract foreign inflows.
However, the success of these reforms hinges on strict enforcement and the effective management of FX liquidity.
Central Bank of Nigeria ,CBN, Governor, Olayemi Cardoso, had revealed that the soon-to-be-introduced electronic FX matching system will address the disconnect between the current naira-to-dollar exchange rate and the naira’s true market value.
Speaking at the Bankers’ Committee Annual Dinner held on November 29, 2024, at Eko Hotel, Lagos, Cardoso emphasized that the system would enhance price discovery and restore stability to the Foreign Exchange ,FX, market.
“The introduction of the FX matching system will enable the Central Bank to monitor the market more effectively and intervene where necessary. This will significantly improve transparency and provide a more accurate reflection of the naira’s value”, Cardoso stated.
