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The Central Bank of Nigeria (CBN) has tightened its operational guidelines on foreign exchange (forex) trading among banks and other authorised dealers.
The guidelines is coming as a measure to stabilise the Nigerian naira’s value.
The rules released on Wednesday by the Financial Market Department of the apex bank are meant to prevent an abuse of forex transaction rates by lenders.
The circular titled: “Amendment of S4 Business Rules and Guidelines”, prescribes an eight-week suspension for banks that violate forex quote rules.
It states that with reference to section 10.1 of the S4 Business Rules and Guidelines, any auction or two-way transaction quote with the CBN must be settled.
“If the transaction is on queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction,” the circular said.
The circular said where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks effective from the date of default.
The circular said ILF shall be bought back or converted to Standing Lending Facility (SLF) by the participant by the close of business day, failing which it shall be automatically be converted to SLF at the prevailing SLF rate plus 500 basis points.
The CBN last week queried five banks for manipulating forex rates, which the regulator detected during the mandatory rendition of forex returns by the lenders. Some of the banks attributed the rate breach to “formatting errors”.
The guidelines is coming as a measure to stabilise the Nigerian naira’s value.
The rules released on Wednesday by the Financial Market Department of the apex bank are meant to prevent an abuse of forex transaction rates by lenders.
The circular titled: “Amendment of S4 Business Rules and Guidelines”, prescribes an eight-week suspension for banks that violate forex quote rules.
It states that with reference to section 10.1 of the S4 Business Rules and Guidelines, any auction or two-way transaction quote with the CBN must be settled.
“If the transaction is on queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction,” the circular said.
The circular said where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks effective from the date of default.
The circular said ILF shall be bought back or converted to Standing Lending Facility (SLF) by the participant by the close of business day, failing which it shall be automatically be converted to SLF at the prevailing SLF rate plus 500 basis points.
The CBN last week queried five banks for manipulating forex rates, which the regulator detected during the mandatory rendition of forex returns by the lenders. Some of the banks attributed the rate breach to “formatting errors”.