Market News

The naira has witnessed a notable recovery, appreciating by N125 against the dollar within a month following the implementation of the Electronic Foreign Exchange Matching System (EFEMS).

This development, which marks a significant shift in Nigeria’s foreign exchange market, was confirmed by data from the Central Bank of Nigeria (CBN).

According to the CBN, the naira strengthened by 8 percent as the dollar was quoted at N1,535 on January 3, 2025, compared to N1,660 quoted on December 2, 2024, the official launch date of EFEMS trading.[admnager ad_id="desktop_1" placement="desktop" lazy="false"]

The introduction of EFEMS was first announced by the CBN on October 3, 2024, as part of a series of reforms aimed at addressing speculation and enhancing transparency in Nigeria’s foreign exchange market. This system was specifically designed for authorised dealers operating within the Nigerian Foreign Exchange Market (NFEM) and became operational on December 2, 2024, after a successful two-week trial period conducted in November.

The EFEMS platform is a fully electronic system that provides real-time pricing and visibility of buy and sell orders. By automating the matching of orders, it ensures that transactions occur at the most competitive prices available, significantly reducing the chances of price manipulation and other market distortions.

Furthermore, the system curtails speculative trading and mitigates the volatility often caused by such distortions. It also improves regulatory oversight, offering enhanced monitoring capabilities for FX activities and ensuring that all trades are conducted within a transparent and well-regulated framework.

Before the introduction of EFEMS, Nigeria’s foreign exchange market relied on manual or semi-automated trading processes, which were prone to inefficiencies and potential manipulation. The new system eliminates these challenges by centralising transactions on a single regulated platform and ensuring real-time visibility and seamless processing. This marks a shift towards a more transparent and efficient foreign exchange trading environment.

Olayemi Cardoso, the governor of the CBN, highlighted the significance of this reform, stating, “Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets.”

While EFEMS has delivered promising results, industry experts stress that challenges remain. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), acknowledged the CBN’s progress in stabilising the foreign exchange market but pointed out that the unregulated black market continues to pose significant hurdles. “The measures taken by the CBN are yielding some positive results, but it is a work in progress,” Yusuf explained. “Speculators and manipulators in the market are constantly devising new tricks, so this must be a continuous effort.”

The naira’s recent appreciation comes after a turbulent year marked by significant instability. In 2024, the currency experienced a sharp depreciation, losing 40.9 percent of its value against the dollar in the official market, despite an increase in external reserves. This decline underscored the persistent challenges facing Nigeria’s currency market, even amid efforts to stabilise the economy.

The EFEMS initiative, while still in its early stages, represents a critical step toward addressing these challenges. Its potential to reduce market distortions, improve transparency, and restore investor confidence could play a pivotal role in ensuring long-term stability in Nigeria’s foreign exchange market.