The Central Bank of Nigeria (CBN), through its introduction of the new foreign exchange window for investors and exporters (I&E), have paved the way for authorised dealers in the foreign exchange (FX) market to offset their excess foreign currency trading positions to other authorised dealers in the market without seeking the prior approval of the regulator.
In almost 2 years, market capitalisation rose to its highest daily gain, from N10.845 trillion to close at N11.262 trillion, while the All-Share Index (ASI) recorded the daily highest gain of 3.9 per cent to close at 32,578.38.
Indications showed that:
- At the close of trading, year-to-date growth rose to 21.2 per cent.
- Monday’s rally was bolstered by Dangote Cement Plc, which added N290 billion to its value to close at N3.578 trillion, accounting for about 69 per cent of the gains recorded in the market.
- Dangote Cement, which accounts for over 30 per cent of market capitalisation, has amassed N596 billion ($1.76 billion) in the first three trading days of June. Its shares rose from N175 at the close of business on May 31 to N210 Monday.
- The market had surged N1.285 trillion, improving from N8.913 trillion at the end of April to N10.198 trillion at the end of May.
The rally was triggered by the introduction of the new foreign exchange window for investors and exporters (I&E) by the CBN. In a circular, the CBN said all authorised dealers shall be subject to a maximum spread of N1, adding that funds purchased by an authorised dealer from another dealer on the interbank market shall not be held in position overnight by the buying authorised dealer or sold to another authorised dealer.
The CBN, in the two-page document signed by its Director, Financial Markets Department, Dr. Alvan Ikoku, added: “Such interbank purchases shall only be sold by the buying authorised dealer to its customers for Permitted/Eligible Transactions as outlined in the above-referenced circular. All documentation requirements for Permitted Transactions shall apply.
“Authorised dealers shall not exceed their respective foreign currency trading position (FCTPL) without approval of the CBN. Compliance with the FCTPL shall strictly be monitored by the CBN.
“All interbank trades – spot, forwards, futures, option and swaps – that have an impact on an authorised dealer’s FCTPL are expected to comply with the rate reasonability standards.”
In addition, the CBN pointed out that it reserves the right to intervene, as a buyer or sellers as it deems it fit in the interbank market.
It advised the dealers to encourage their corporate clients to on-board the FMDQ-advised forex trading system immediately, in order to avoid sanctions and to deepen the market.
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