Industry insiders feared that only banks that benefited from the previous FX regime would be favoured as FXDPs, thereby enjoying an undue advantage, the CBN has now moved to douse fears of the emergence of a cartel in the new foreign exchange market.
The Central Bank of Nigeria
As it declares the door open to all banks to be Foreign Exchange Primary Dealer (FXPD), Nigeria’s apex bank, the Central Bank of Nigeria (CBN) has now moved to douse fears of the emergence of a cartel in the new foreign exchange market.
Recall that CBN had on Wednesday, rolled out guidelines for primary dealers – banks that will play directly in the market – with conditions that they must have at least N200 billion in shareholders’ funds, N400 billion worth of forex assets and 40% liquidity ratio, although those who meet two of the requirements will qualify.
TheCable reports that in a revised set of guidelines on Friday, the CBN has now thrown the door open to other banks to participate even if they do not meet the criteria for the choice of 10.
The reviewed guidelines stated:
“In order to further deepen the FX market the Central Bank of Nigeria has decided to allow any Authorised Dealer who is interested in acting as a Foreign Exchange Primary Dealer (FXPD) to apply even if the said Authorised Dealer did not meet the quantitative criteria stated in the CBN Guidelines for Primary Dealership in Foreign Exchange Products released on June 15, 2016.
“The Central Bank of Nigeria shall evaluate all the first set of registered FXPDs by December 31, 2016. The evaluation shall cover both quantitative and qualitative Foreign Currency Balance Sheet, adequacy of Pre-Settlement Risk (PSR) lines for other Authorised Dealers, etc). Please note also that the performance and market conduct of the FXPDs in their dealings with the CBN shall be a major factor in the said evaluation.
“For the avoidance of doubt, FXPDs are to provide two-way quotes (bid and offer) to the CBN and CBN reserves the right to deal on any of the quotes. As stated in section 4.1 of the Guidelines the CBN trade sizes with the FXPDs shall be as follows:
“The immediate applicable bid-ask spreads shall be agreed between the CBN and FXPDs and these shall be reviewed periodically. The CBN reserves the right to adjust the standard sizes stated above.
“All other provisions of the Guidelines remain valid.”