Central Bank Of Nigeria
FX Structure | FX Mgt Before Now. | FX Mkt | Debt Conversion | Exchange Rate Policy | Movement in Reserves | International Payments | Reserve Management
The evolution of the international trade market in Nigeria up to its present state was influenced by a number of factors such because the altering sample of worldwide commerce, institutional modifications within the financial system and structural shifts in production. Before the institution of the Central Bank of Nigeria (CBN) in 1958 and the enactment of the Exchange Control Act of 1962, foreign exchange was earned by the private sector and held in balances abroad by commercial banks which acted as brokers for local exporters. During this period, agricultural exports contributed the majority of foreign trade receipts. The fact that the Nigerian pound was tied to the British pound sterling at par, with simple convertibility, delayed the development of an active overseas trade market. However, with the institution of the CBN and the subsequent centralisation of international alternate authority within the Bank, the necessity to develop a neighborhood international change market became paramount.
The increased export of crude oil in the early 1970s, following the sharp rise in its prices, enhanced official international trade receipts. The international exchange market skilled a boom throughout this period and the management of international change sources grew to become needed to ensure that shortages did not come up. However, it was not until 1982 that complete exchange controls were utilized on account of the foreign alternate disaster that set in that 12 months. The increasing demand for international trade at a time when the supply was shrinking encouraged the event of a flourishing parallel market for international alternate.
The change management system was unable to evolve an applicable mechanism for overseas change allocation in consonance with the objective of inside stability. This led to the introduction of the Second-tier Foreign Exchange Market (SFEM) in September, 1986. Under SFEM, the willpower of the Naira change fee and allocation of foreign exchange have been primarily based on market forces. To enlarge the scope of the Foreign Exchange Market Bureaux de Change were launched in 1989 for dealing in privately sourced international exchange.
Because of volatility in rates, further reforms were launched in the Foreign Exchange Market in 1994. These included the formal pegging of the naira alternate price, the centralisation of international trade within the CBN, the restriction of Bureaux de Change to purchase foreign exchange as brokers of the CBN, the reaffirmation of the illegality of the parallel market and the discontinuation of open accounts and payments for assortment as means of payments sectors.
The Foreign Exchange Market was liberalised in 1995 with the introduction of an Autonomous Foreign Exchange Market (AFEM) for the sale of foreign alternate to end-customers by the CBN by way of selected authorised sellers at market determined exchange rate. As well as, Bureaux de Change have been as soon as more accorded the status of authorized buyers and sellers of international change. The Foreign Exchange Market was further liberalized in October, 1999 with the introduction of an Inter-financial institution Foreign Exchange Market (IFEM).
Structure of Nigeria's Foreign Exchange market Nigeria
The Nigerian foreign change market has witnessed super adjustments. The Second-tier Foreign Exchange Market (SFEM) was launched in September, 1986, the unified official market in 1987, the autonomous Foreign Exchange Market (AFEM) in 1995, and the Inter-financial institution Foreign Exchange Market (IFEM) in 1999.
Bureaux de Change had been licensed in 1989 to accord entry to small customers of overseas exchange and enlarge the formally recognised international change market. Exchange rates within the Bureaux de Change are market determined. A parallel marketplace for foreign change has been in existence because the change control era. It has been established that scarcity in the official sector and bureaucratic procedures necessitated the growth and development of the parallel market.
