The Central Bank of Nigeria, Olayemi Cardoso announced that the upcoming electronic FX matching system will help align the naira-to-dollar exchange rate with the naira’s true market value.
Speaking at the Bankers’ Committee Annual Dinner on November 29, 2024, at Eko Hotel, Lagos, governor Cardoso highlighted that the electronic FX matching system would enhance price discovery and restore stability to Nigeria’s foreign exchange market.
The CBN governor stated that the naira’s current exchange rate is driven by the actions of desperate buyers rather than genuine market dynamics.
“The current USD exchange rate reflects the price that the most desperate buyers are willing to pay, and this does not represent the true market value of the naira,” he said. The FX matching system, he noted, will correct these distortions, creating a more transparent and stable FX market.
The electronic FX matching system is a key component of the CBN’s broader efforts to unify Nigeria’s exchange rate and eliminate market distortions.
Over the past year, the CBN has implemented significant reforms, such as clearing outstanding foreign exchange obligations, which have boosted confidence among businesses, especially manufacturers and airlines.
“The introduction of the FX matching system will enable the Central Bank to monitor the market more effectively and intervene where necessary. This will significantly improve transparency and provide a more accurate reflection of the naira’s value,” Cardoso stated.
Cardoso also addressed concerns over the persistent demand-supply gap narrative in the FX market, stating that it is fueling unnecessary panic. He emphasized that such disinformation has distorted the public’s perception of the FX market’s true condition.
“Disinformation about a supposed demand-supply gap has created panic that is unwarranted. The FX matching system will help put an end to this by ensuring that rates reflect actual market activity,” he explained.
The governor further reassured stakeholders that these measures would foster a more functional FX market, enabling businesses and individuals to operate with greater confidence.
Cardoso emphasized the critical role Nigerian banks must play in ensuring the success of FX reforms. He noted that a well-functioning FX market cannot depend solely on the Central Bank’s periodic interventions.
“An FX market defined solely by when and how the Central Bank buys or sells dollars is inadequate for the needs of a dynamic economy like Nigeria’s. Now is the time for banks to step up to their intermediation and market-making responsibilities,” Cardoso stated.
He urged financial institutions to actively offer tailored solutions to businesses and individuals, helping them manage risks and meet their operational needs effectively.
With the rollout of the electronic FX matching system, the CBN aims to promote greater stability and predictability in the FX market.
By addressing speculative distortions and ensuring exchange rates are driven by real demand and supply, the naira is expected to better reflect its true value.
