CBN Removes Cap on Interbank FX Transactions in Ongoing Reforms

CBN Removes Cap on Interbank FX Transactions in Ongoing Reforms


CBN Removes Cap on Interbank FX Transactions in Ongoing Reforms

In a circular dated February 8, the Central Bank of Nigeria (CBN) announced the removal of the ±2.5% cap spread on interbank foreign exchange (FX) transactions. The circular, signed by CBN Director of Financial Markets, Omolara Omotunde Duke, highlights the central bank's commitment to fostering a "market-based price discovery system" in line with ongoing FX market reforms.

Key Points from the Circular

  • The CBN discontinues the ±2.5% cap on the spread for interbank FX transactions and removes restrictions on the sale of interbank proceeds.

  • Authorized Dealers are instructed to conduct their foreign exchange transactions on a "Willing Buyer and Willing Seller" basis, emphasizing high ethical standards, including transparent price disclosures.

  • All executed transactions must be promptly recorded on relevant treasury systems and reported to market authorities as stipulated.


  • A circular issued on August 9, 2023, imposed an exchange rate cap spread of ±2.5% for International Money Transfer Operators (IMTOs) and banks based on NAFEM's previous day's closing rate.

  • However, on January 31, another circular removed the exchange rate cap for IMTOs, aligning with the CBN's strategy to liberalize the market and adapt to current market realities.

  • The move effectively discontinues a guideline from the 2016 "Revised Guidelines for the Operation of the Nigerian Inter-bank Foreign Exchange Market," which stated that inter-bank funds shall not be sold to Bureau-de-Change (BDC).

  • With the recent directive, authorized dealers in the inter-bank FX market can now sell proceeds to BDC operators and other willing buyers outside the market.

The CBN's decision reflects its commitment to creating a more dynamic and market-responsive FX environment, emphasizing transparency and ethical conduct in foreign exchange transactions.

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