CBN bets on rules to stabilize FX market

Nigeria's foreign exchange market has long been characterized by uncertainty, with importers facing delays, exporters questioning repatriation channels, and investors wary of policy shifts. The Central Bank of Nigeria (CBN) has now introduced the fourth edition of its Foreign Exchange Manual, signaling a significant step towards a market governed by predictable rules rather than discretion.

“

Foreign exchange is more than a financial instrument; it is a critical enabler in any open economy. It anchors price stability, facilitates the flow of goods and capital, and shapes investor sentiment.

Effective June 1, the revised manual replaces the 2018 edition, which was issued before major economic events like the global pandemic, oil price volatility, and significant exchange rate reforms. These developments exposed the weaknesses in the previous framework, increasing demand for clearer operating standards. The CBN's move aims to establish a more transparent and accountable system.

CBN Governor Olayemi Cardoso emphasized the necessity of these updates, stating that foreign exchange is a critical enabler for an open economy, influencing price stability, capital flow, and investor sentiment. He noted that evolving global and domestic economic conditions necessitated a revision of the market's guiding framework. "Ongoing foreign exchange market reforms have made it necessary to revise the Manual to provide a more coherent and forward-looking regulatory framework," Cardoso explained.

“

Ongoing foreign exchange market reforms have made it necessary to revise the Manual to provide a more coherent and forward-looking regulatory framework. The last edition was issued in 2018, making this review both timely and necessary.

The reform program, under Cardoso's leadership, has prioritized restoring confidence through transparency, market discipline, and credible price discovery. The updated manual is intended to provide the operational foundation for these objectives. Dr. Muhammad Abdullahi, Deputy Governor of the Economic Policy Directorate, indicated that the review is part of a broader strategy initiated by the current apex bank administration, aiming to create a more stable and liquid FX market.

“

It is important to note that the reform and comprehensive review of the manual is part of a wider strategy initiated at the beginning of the current administration of the apex bank.