FXPD: All banks to set Naira rate in strategic trading today

•Treasurers project N270-N300/$

All Deposit Money Banks (DMB) in Nigeria will set the first exchange rate of the Naira to the dollar as the currency price is allowed to be determined by demand and supply today (Monday), after the central bank abandoned its dollar peg last week.

This is just as  Naira which is projected to firm up to Between N270 to N300 to a dollar, gained 8per cent in value to N340/$ since Wednesday till Friday as the market prepares for the commencement of the new forex dispensation.

The Central Bank of Nigeria (CBN) doused fears of the emergence of a cartel in the new foreign exchange (forex) market by declaring the door open to all banks to be Foreign Exchange Primary Dealers (FXPD).

It 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 40per cent liquidity ratio, although those who meet two of the requirements will qualify.

But 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 apex bank had said it would float the national currency on Monday, but it has given few details on how the new rules will be implemented.

In their first detailed guidance, central bank officials told bank chief executives at a meeting on Friday that lenders would set the first Naira rate to the dollar based on demand without intervention from the central bank.

A central bank source said that Governor Godwin Emefiele was at the meeting and confirmed that commercial banks will determine the market rate on Monday.

The central bank officials also told the bankers it did not commit itself to clearing up a backlog of hard currency estimated at around $4 billion but will intervene if needed, the banking official said.