₦airaland Forum

lafuria1:
where will that parallel market get their dollars from and for how much?

CBN won't be selling dollars to any bank at a fixed rate anymore, and it's only occasionally CBN will enter the market to sell dollars to anybody.
With the floating policy, CBN won't be meeting anybody demand, CBN hand no dey, just occasionally when needs arise.

The BDC and banks are now one and the same thing, what you gonna have is BDC and and banks selling and buying dollars at their own.

you will first tell me where parallel get the dollars they sell presently for 370. Remember my moniker when the rate is disclose on Monday and watch what happens to parallel market.

Doyin2:
So what's the parallel market rate for the Dollar and pounds in the US and UK respectively?

Over sabi de worry you

you know nothing about currency so fvck off before i send Ogun for u.

agarawu23:
what's good here? We are
yet to know the exchange rate

Higher exchange rate doesn't imply bad news.We should stop importing what we produce.

What ever the rate,would reflect the true value of the NAIRA

If I tell una say I understand all this things wey them dey talk here so I dey lie

Boss13:
Please see full guidelines as released by the CBN. I retract my previous statement on over-the-counter Futures. This is very good for hedging FX fluctuations and I support that a formalised market be established for it. Welcome development.

However, for those who would not read it. It is official. Nigeria has devalued its currency in view of its economic challenges and illiquidity in the FX market.

New guidelines for the operation of the Nigerian Inter-Bank FX Market

1.0 Introduction

In line with the objectives of enhancing efficiency and facilitating a liquid and transparent, Foreign Exchange (FX) market, the Central Bank of Nigeria (CBN) hereby releases the revised guidelines on the operations of the Nigerian Inter-Bank FX market towards the liberalisation of the market.

2.0 Guidelines

The CBN shall operate a single market structure through the autonomous/inter-bank market i.e. the Inter-Bank Foreign Exchange Market with the CBN participating in the FX market through interventions (i.e. CBN Interventions) directly in the inter-bank market or through dynamic “Secondary Market Intervention Mechanisms”.

Furthermore, to promote the global competitiveness of the market, the inter-bank FX market will be supported by the introduction of additional risk management products offered by the CBN and Authorised Dealers to further deepen the FX market, boost liquidity and promote financial security in the market.

Additionally, to further improve the dynamics of the market, the CBN shall introduce FX Primary Dealers (FXPDs). These shall be registered Authorised Dealers designated to deal with the CBN on large trade sizes on a two-way quote basis. amongst other obligations as stated in the FXPD Guidelines – (Guidelines for Primary Dealership in FX Products). The FXPDs shall operate with other Authorised Dealers (non-FXPDs) in the Inter-bank market.

2.1 Inter-bank Foreign Exchange

Market 2.1.1

Participants in the inter-bank FX market shall include Authorised Dealers, Authorised Buyers, Oil Companies, Oil Service Companies, Exporters, End-users and any other entity the CBN may designate from time to time.

2.1.2 Authorised Dealers shall buy and sell FX among themselves on a two-way quote basis via the FMDQ Thomson Reuters FX Trading Systems (TRFXTConversational Dealing), or any other system approved by the CBN.

2.1.3 Authorised Dealers may offer one-way quotes (bid or offer) on all products and on request to other Authorised participants via the FMDQ Thomson Reuters FX Trading System (FMDQ TRFXT – Order Book System), or any other system approved by the CBN.

2.1.4 The maximum spread between the bid and offer rates in the inter-bank market shall be determined by FMDQ OTC Securities Exchange (FMDQ) via its market organisation activities with the Financial Market Dealers Association (FMDA).

2.1.5 Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorised Dealers at the inter-bank rate.

2.2 HEDGING PRODUCTS

2.2.1 To further deepen the FX market, in addition to the already approved hedging products referenced in the CBN “Guidelines for FX Derivatives and Modalities for CBN FX Forwards”, Authorised Dealers are now permitted to offer Naira-settled non-deliverable overthe-counter (OTC) FX Futures.

2.2.2 OTC FX Futures’ transactions shall be nonstandardised with fixed tenors and bespoke maturity dates.

2.2.3 OTC FX Futures sold by Authorised Dealers to endusers must be backed by trade transactions (visible and invisible) or evidenced investments.

2.2.4 FMDQ will provide the appropriate benchmarks for the valuation and settlement of the OTC FX Futures and other FX derivatives.

2.2.5 FX OTC Futures and Forwards will count as part of the FX positions of Authorised Dealers.

2.2.6 To promote market liquidity, Authorised Dealers may apply FX Spot transactions to hedge Outright Forwards, OTC FX Futures and FX Options etc.

2.2.7 Settlement amounts on OTC FX Futures may be externalised for Foreign Portfolio Investors (FPIs) with Certificates of Capital Importation. Such settlement amounts shall be evidenced by an FMDQ OTC FX Futures Settlement Advice.

2.2.8 Furthermore, FMDQ will be developing detailed registration and operational regulation on FX Options and will drive, with the market, the development of other risk management products and attendant guidelines.

2.3 Foreign Currency Trading Position

2.3.1 Further to the CBN Circular Ref: TED/FEM/FPC/GEN/01/001 dated 12th January 2015, Authorised Dealers, (FXPDs and non-FXPDs) are hereby notified of a review in the daily Foreign Currency Trading Positions of banks. Consequently, Authorised Dealers shall have maximum limits of +0.5%/-10% of their Shareholders’ Funds unimpaired by losses as Foreign Currency Trading Position Limits to support their obligations as liquidity providers at the close of each business day.

2.3.2 Where an Authorised Dealer requires a higher position limit to accommodate a customer trade, the Authorised Dealer shall contact the Director, Financial Markets Department. Where the request is assessed as valid, the Director shall communicate immediate approval by text or email to the Authorised Dealer. Thereafter, the Authorised Dealer must, with 24 hours, write to the Director, Financial Markets Department who will thereafter communicate an approval in writing. The Director, FMD shall exercise discretion on the duration of the temporary position limit depending on the estimated defeasance period of the transaction size.

2.3.3 Returns on the purchases and sales of FX shall be rendered daily to the CBN by Authorised Dealers.

2.3.4 Inter-bank funds shall NOT be sold to Bureaux-deChange.

2.3.5 The forty-one (41) items classified as “Not Valid for Foreign Exchange” as detailed in the CBN Circular Ref: TED/FEM/FPC/GEN/01/010, remain inadmissible in the Nigerian FX market. 2.3.6Applicable exchange rate for the purpose of import duty payments shall be the daily inter-bank FX closing rate as published on the CBN website.

2.4 CBN INTERVENTIONS

2.4.1 Participation in the FX market by the CBN shall be via: i. The Inter-Bank FX Market ii. Secondary Market Intervention Sales (SMIS)

2.4.2 Intervention Through the Inter-Bank FX Market

The CBN reserves the right to intervene in the inter-bank market to either buy or sell FX Spot upon the receipt of valid two-way quotes on the standard amount as defined from time to time in the FXPD Guidelines.
CBN may also intervene in the inter-bank market by placing orders for non-standard amounts in the FMDQ TRFXT – Order Book System., or any other system as approved by the CBN.
There shall be no predetermined spread on FX Spot transactions executed through CBN intervention with the FXPDs.
The CBN reserves the right to intervene in the inter-bank market to either buy or sell FX Forwards upon the receipt of valid two-way quotes on the standard amount as defined from time to time in the FXPD Guidelines.
To enhance liquidity, CBN shall also offer nondeliverable OTC FX Futures (bid or offer) daily on the FMDQ OTC FX Futures Trading & Reporting System.
The OTC FX Futures shall be in non-standardised amounts and different fixed tenors which may be sold on any date thereby giving bespoke maturity dates.
FXPDs may purchase OTC FX Futures for their own accounts or sell to other Authorised Dealers and end-users. viii. There shall be no maximum spread on the sale of the Forwards and OTC FX Futures purchased from CBN by FXPDs to Authorised Dealers and endusers
2.4.3 Secondary Market Intervention Sales (SMIS)

The CBN may, at its discretion, intervene in the FX market through the sale of FX to Authorised Dealers (wholesale) or to end-users through Authorised Dealers (retail) via a multiple-price book building process using the FMDQ-Thomson Reuters FX Auction Systems, or any other system approved by the CBN. All SMIS bids shall be submitted to the CBN through the FXPDs.
SMIS – Wholesale:

All FX Spot purchased by Authorised Dealers are transferable in the inter-bank FX market.
CBN may offer long-tenored FX Forwards of 6 – 12 months or any tenor to Authorised Dealers. o Sale of FX Forwards by Authorised Dealers to end-users must be tradebacked. There shall be no predetermined spread.
FX Forwards purchased by Authorised Dealers are transferable in the inter-bank FX market.
SMIS – Retail:

All FX Spot purchased by Authorised Dealers for end-users shall be for eligible transactions only upon the provision of appropriate documentation.
FX Spot sold to any particular end-user shall not exceed 1% of the overall available funds on offer at each SMIS session.
CBN may offer FX Forwards to endusers through Authorised Dealers and may limit the amount sold to an individual end-user o All FX Forwards sales to end-users must be trade-backed.
There shall be no maximum spread on the sale of FX Forwards by Authorised Dealers to end-users.
3.0 Execution and Reporting

2.5 To ensure effective monitoring of the FX market, all Authorised Dealers and end-users are required to trade only on FMDQ-advised FX Trading System(s). All transactions not executed on the Trading Systems shall be voice reported on the Trading Systems.

2.6 All FX transactions by Authorised Dealers are to be reported to FMDQ via the FMDQ-advised FX Reporting System. CBN will be granted access to this system.

4.0 Sanctions

Authorised Dealers are enjoined to comply with the provisions of these Guidelines, failing which appropriate sanctions shall be imposed, including suspension of the FXPD, Authorised Representatives of the Authorised Dealer, suspension of Authorised Dealer from the FX market and/or withdrawal of the Authorised Dealership Licence.

For the avoidance of doubt, all Authorised Dealers are to refer policy issues in respect of which they are in doubt to the Director, Financial Markets Department, Central Bank of Nigeria for clarification.

5.0. Primacy of the Guidelines

These Guidelines supersede:

Circular Ref: TED/FEM/FPC/GEN/01/020 dates October 28, 2014 titled “Guidelines on the Operation of CBN Interventions in the Inter-Bank Market through the Two Way Quote System”.
All other prior Circulars and Guidelines on the subject matter. Please be guided
Issued 15th June 2016

This your Psalm of David is confusing us the Wailers, We loaded our Guns this morning, waiting to fire at PMB, now we dont even know who to shoot, PMB or Ourselves

Doyin2:
And you are tactically wrong!

Devaluation is a deliberate reduction in the value of Naira to a fixed and specific rate.E.g N300 to 1 Dollar.

But what CBN has done is to allow market forces to determine the real value of the Naira which is unknown yet,to he determined by the forces of demand and supply.

Thus the Naira could either appreciate or depreciate,determined by supply and demand.

You are right with your definition and that's exactly what CBN just did. Didn't you read the full release?In their statement, price of naira to dollar would be fixed on monday

If dollar does not cross 400 Naira by end of the month, I'll be shocked. Allowing true market value means that the government is truly ready for the world to see the Nigerian economy at its face value. This means 360 Naira to 1 Dollar and the worst is yet to come. I believe we would cross 400 Naira to 1 Dollar soon before the market corrects itself hopefully

DropShot:
Displaying of characteristics of a typical tout/thug only confirms lack of decent upbringing. Not evidence of "schooling" anyone.

Say we dey online dey play together no mean say we be mate by any measure.

I know where you work. Guy,please be quiet.

I have a question to ask though.

In a bid for the FG to meet demands for the dollar, can the FG print enough Naira and then exchange it for the dollar on other Markets.

abbey621:
If dollar does not cross 400 Naira by end of the month, I'll be shocked. Allowing true market value means that the government is truly ready for the world to see the Nigerian economy at its face value. This means 360 Naira to 1 Dollar and the worst is yet to come. I believe we would cross 400 Naira to 1 Dollar soon before the market corrects itself hopefully

You sabi the market dynamics very well, bro.
This could play out like the mobile phone liberalisation of 2000 that had very high initial prices until Glo came with great competition.
IF this new FULL float policy is scrupulously implemented, even for government transactions WITHOUT letting some privileged people get forex at lower CBN rates for round-tripping, then in due course we will see more inflow of forex into our economy that will lead to lower rates. In the meantime, EXPORTS should increase while imports REDUCE and local production grows for more EMPLOYMENT.
However all these better better things won't happen if Buhari's government and the CBN keep giving forex to some people who will sell it CORRUPTLY for massive gains having done absolutely NOTHING to add value to the nation.

Jengem:
Even me that I have certificate I dont understand, how much less Bubu

Guy u bad o. Den don scatter my brain too

Davvymavvy:
You are right with your definition and that's exactly what CBN just did. Didn't you read the full release?In their statement, price of naira to dollar would be fixed on monday

Hope we have the same CBN guidelines.I am not aware of any attempt to FIX the rate on Monday.But I am aware that the rate would be DETERMINED at the market's first trading session on Monday.

blueseacats:
This is like saying that naira should fight in the ring without any help just referee.

Naira will lose for along time before it picks up .

u must be a mind reader! u just took this words from my mind!


ALL THESE GRAMMAR FROM CBN IS JUST TO TELL US THAT THE NAIRA IS SIMPLY ON ITS OWN NOW.

ITS LEFT TO EITHER SINK OR SWIM.

AND BASED ON SITUATION ON GROUND, ITS GOING TO SINK DEEP! WE MAY END UP WITH AN EXCHANGE OF N670 TO N800 TO THE US DOLLARS BEFORE THE MONTH RUNS OUT!


THINGS WILL REALLY BE HARD FOR PEOPLE FROM NEXT WEEK. IN FACT THERE WILL BE ANOTHER MAJOR FUEL CRISIS AND HEAVY RISE IN FOOD AND OTHER COMMODITY PRICES - ALL DUE TO SCARCE AND EXPENSIVE FOREX.

BUT THE TRUTH IS, WE NEED THESE MEASURES NOW AND IF WE CAN ALLOW THE NAIRA TO FIGHT FOR ITSELF, BEFORE THE YEAR RUNS OUT, THINGS WILL BE SUPERBLY OK!

trash

DropShot:
Mynd44 Lalasticlala Seun, please do justice. Rule 2 broken.

you throw insults at people but when they reply you, you start to call seun lalasticlala to come help you ban. Don't forget to also tell them to just filter the whole nairalanders from SS and SE and just wipe them off.

What people dont seem to realize is that cbn just sold Nigeria to the rich cabal ruling the nation.

Doyin2:
Hope we have the same CBN guidelines.I am not aware of any attempt to FIX the rate on Monday.But I am aware that the rate would be DETERMINED at the market's first trading session on Monday.

"As per the new price of the Naira, the CBN Governor mentioned that the price will be known when the market opens officially on Monday"

You are right, thanks for correction

omolola15:
Thanks for the analysis jare. I hope some ignorants wailing about will learn.

happney65 oya come receive lecture. Nairaland economic team don explain wetin CBN do. Come and take 1 lollipop and stop wailing about.

Nonesense..Na the same Jargons them dey tell you since 2015 wey don destroy Nigeria..Nonesense People..Am not surprised though..You are a Certified Zoombie

johnchukky:
"CBN finally floats the naira" please what does this mean?

That means that the naira exchange rate will now be determined by demand and supply or market forces.

Well for a lay man understanding, it simply means, cbn no go de control price for buying Dollar or vice versa. But sometimes dem go intervene if things Waka pass him boundary. So everything come fall for demand and supply. E.g petrol price was pegged at 145 but due to the decrease in demand some stations de sell below 145. I even bought mine at 135 at Asaba. Increase in demand leads to increase in price and decrease in demand , the market go crash. I go stop for here. Hope say I try small?

obiekunie1:
u must be a mind reader! u just took this words from my mind!


ALL THESE GRAMMAR FROM CBN IS JUST TO TELL US THAT THE NAIRA IS SIMPLY ON ITS OWN NOW.

ITS LEFT TO EITHER SINK OR SWIM.

AND BASED ON SITUATION ON GROUND, ITS GOING TO SINK DEEP! WE MAY END UP WITH AN EXCHANGE OF N670 TO N800 TO THE US DOLLARS BEFORE THE MONTH RUNS OUT!


THINGS WILL REALLY BE HARD FOR PEOPLE FROM NEXT WEEK. IN FACT THERE WILL BE ANOTHER MAJOR FUEL CRISIS AND HEAVY RISE IN FOOD AND OTHER COMMODITY PRICES - ALL DUE TO SCARCE AND EXPENSIVE FOREX.

BUT THE TRUTH IS, WE NEED THESE MEASURES NOW AND IF WE CAN ALLOW THE NAIRA TO FIGHT FOR ITSELF, BEFORE THE YEAR RUNS OUT, THINGS WILL BE SUPERBLY OK!

no government ever abandons it's currency. Because i's allowed to float does mean it's abandoned. Only that now government must rely on practical economics tools to influence the exchange rate.

For example, simply increasing interest rates leads to a reduction in the amount of naira in circulation which will improve the value of the currency.

But the best tool is to have a balanced budget or one with low deficits.

Jengem:
Even me that I have certificate I dont understand, how much less Bubu

You are not alone o..abeg ca. someone simplify?

can some one explain these grammars,I don't understand them at all. do they mean devaluing naira,..? will fx be equivalent or almost the same rate with black market...? let gurus explain it to me.

Will it make Naira go up against dollar? I am not interested in grammar.

onatisi:
What people dont seem to realize is that cbn just sold Nigeria to the rich cabal ruling the nation.

How, u and I cannot get dollars at 199 from central bank but the rich cabals can, some will even buy at 199 and sell it back to us(Nigerians) at 350,calculate how much this guy's are making per dollar

Welcome to the real world of currency floating, ask South africa about it. If oil crashes, Naira will free fall to N500 to the dollar. Soon dangote will be a poor man, he has been living on a borrowed time and made to be the richest man in Africa with an artificial currency rate. On 28 June, Naira will go down to N330, thats 65% drop, and there is a likelyhood that it may touch N400 within few days.

So if Dangote was $17bn richer, subtract that $17bn by 65% of it, which will mean DANGOTE's wealth will fall to $5.95bn. which will make him the 3rd richest man in Africa.

But if economic conditioms improves and there is more money flowing into Nigeria, it would boost the currency, which might drop to bellow N200 in the future, depending on how the economy is doing.

My understanding of this policy is that..

there will no longer be discrepancies in the value of the Naija against other currencies as before now we had the CNN rate and the black market rate.
Now the rates will be unified and the forces of demand and supply will determine the pricing that us exchange rate.

Why is this Good move?

Like subsidy government have had to shore up the difference between the market price and the cbn rate which have had talking effect on our reserves.

With the China deal in place and Nigeria settling her trade with yuan instead of the dollar as it is currently.
The pressure on the naira will reduce and we should start seeing considerable Naira gain in not so long.

It seems like policy wise we're on the right part.

guychidile:
can some one explain these grammars,I don't understand them at all.
do they mean devaluing naira,..?
will fx be equivalent or almost the same rate with black market...?
let gurus explain it to me.

Lets start here, the current rate which is N200 to $1 is not the true value of the naira. The true value of Naira could be above N300 to the dollar.

If the CBN adorpt floating system, it means the currency will find its value based on how much its traded. if there is more flow of dollars into Nigeria, that boosts the naira, it will appreciate. if there is more importing of goods from outside, which means people are spending more naira to buy goods from outside the country, the naira will depreciates.

What this means is, if the Naira remains above N300 to the dollar for more than 12 months, that in turn will throw Nigeria into 3rd biggest economy in Africa after Egypt and South Africa.

Here are a few questions-
If it's to be floated, why have agents?
What's to stop the agents from becoming a cabal?
What criteria are used to choose them?
Who really believes that dangote will buy dollars at market rate?
If strength of naira is dependent on it's quantity when compared to dollar, what happens when govt pumps N500billion into the economy?
What happens to people's dollars trapped in banks-
Shey cbn go release dia moni?
How much forex inflow do we think will occur for the rest of 2016?
What's to stop me from buying dollars in order to import the 41 items?
Oya. Gurus cari go.

It is guidelines like this that causes inflation and panicking. Too high level for the common man on the street to understand. All they would be thinking now is Naira has no value hence charge anything above normal for services rendered or goods being sold.

CBN should have set out with a more friendly and understandable guidelines buh... that governor man head nor de

tinsel:
If you are a business man you will know there is an unhealthy competition in the market. People that have connections will buy dollar at 199 and you that don't have will buy at 350
When the goods arrive you cannot saale untill those that bought at 199 finish there products
But now with the changes everybody will be buying dollars at the same rate. This is good for business..

From all the things said above, this is the only one I understood in a layman's term. Thanks.