The Nigerian naira has seen a notable recovery, appreciating by N125 against the US dollar within a month of the official launch of the Electronic Foreign Exchange Matching System (EFEMS).

How does EFEM introduction help the naira?

Data from the Central Bank of Nigeria (CBN) revealed that the naira has strengthened by 8% or N125 since the day the EFEMS system became operational. At the EFEM launch on December 2, 2023, the dollar was quoted at N1,660 in the official market.

The latest exchange rate shows that the naira against the dollar was N1,536 on Monday, January 6.

Similarly, in the black market, the dollar has crashed from selling as high as N1,750 to the current rate of N1,655.

What to know about the EFEM

EFEMS is a platform introduced by the Central Bank of Nigeria (CBN) to facilitate foreign exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM).

EFEMS aims to enhance transparency and governance in FX trading.

According to CBN, the EFEMS provides real-time pricing and visibility of buy and sell orders, automating the matching of orders to ensure transactions occur at the most competitive prices available.

EFEM reduces the risk of price manipulation and market distortions while curbing speculative trading and mitigating volatility.

BusinessDay reports that, before the introduction of EFEMS, Nigeria’s foreign exchange market depended on manual or semi-automated trading, prone to inefficiencies and manipulation.

This has changed as EFEM centralises transactions on a single platform, ensuring real-time visibility and efficient processing.

Expert comments on EFEM

While EFEMS has delivered encouraging outcomes, industry experts caution that challenges remain.

In an interview with Legit.ng, Aminu Gwadabe, president of the Association of Bureaux De Change of Nigeria (ABCON), stated that the naira's appreciation relies on CBN interventions in the EFEMS market.

He also emphasized the need for increased liquidity in the retail exchange market through Bureau De Change (BDCs) to further stabilise rates.

Also, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), acknowledged the progress made by the CBN but emphasized the persistent risk posed by the unregulated black market.

Yusuf stated: “The measures taken by the CBN are yielding positive results, but it is still a work in progress. Speculators and market manipulators are constantly finding new ways to exploit the system, so this effort must be sustained.”

CBN revised guidelines for NFEM

Earlier, Legit.ng reported that the CBN has introduced revised guidelines for the NFEM. Under the new framework, authorised dealers are required to facilitate FX transactions for businesses and individuals.

The CBN also asked dealers to conduct their due diligence, providing transparent pricing.