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 alternate market in Nigeria as much as its current state was influenced by a quantity of factors such because the altering pattern of international commerce, institutional adjustments within the financial system and structural shifts in production. Before the establishment of the Central Bank of Nigeria (CBN) in 1958 and the enactment of the Exchange Control Act of 1962, international alternate was earned by the personal sector and held in balances abroad by business banks which acted as brokers for local exporters. During this interval, agricultural exports contributed the bulk of foreign exchange receipts. The fact that the Nigerian pound was tied to the British pound sterling at par, with straightforward convertibility, delayed the development of an energetic international alternate market. However, with the institution of the CBN and the subsequent centralisation of foreign exchange authority within the Bank, the necessity to develop an area international trade market grew to become paramount.
The increased export of crude oil within the early 1970s, following the sharp rise in its costs, enhanced official foreign alternate receipts. The overseas trade market skilled a boom during this interval and the management of foreign change resources turned vital to ensure that shortages didn't arise. However, it was not until 1982 that comprehensive change controls have been utilized as a result of the international exchange crisis that set in that yr. The rising demand for overseas alternate at a time when the availability was shrinking encouraged the development of a flourishing parallel marketplace for overseas exchange.
The trade management system was unable to evolve an appropriate mechanism for foreign exchange allocation in consonance with the purpose of inside steadiness. This led to the introduction of the Second-tier Foreign Exchange Market (SFEM) in September, 1986. Under SFEM, the willpower of the Naira alternate fee and allocation of overseas change have been primarily based on market forces. To enlarge the scope of the Foreign Exchange Market Bureaux de Change have been introduced in 1989 for dealing in privately sourced overseas change.
Because of volatility in charges, further reforms had been introduced in the Foreign Exchange Market in 1994. These included the formal pegging of the naira trade price, the centralisation of overseas trade in the CBN, the restriction of Bureaux de Change to purchase international alternate as agents of the CBN, the reaffirmation of the illegality of the parallel market and the discontinuation of open accounts and bills for assortment as means of funds sectors.
The Foreign Exchange market Nigeria was liberalised in 1995 with the introduction of an Autonomous Foreign Exchange Market (AFEM) for the sale of overseas change to finish-users by the CBN via chosen authorised dealers at market determined alternate rate. As well as, Bureaux de Change had been once extra accorded the standing of authorized patrons and sellers of overseas trade. The Foreign Exchange Market was additional liberalized in October, 1999 with the introduction of an Inter-financial institution Foreign Exchange Market (IFEM).
Structure of Nigeria's Foreign Exchange Market
The Nigerian international exchange market has witnessed large adjustments. The Second-tier Foreign Exchange Market (SFEM) was introduced in September, 1986, the unified official market in 1987, the autonomous Foreign Exchange Market (AFEM) in 1995, and the Inter-bank Foreign Exchange Market (IFEM) in 1999.
Bureaux de Change had been licensed in 1989 to accord access to small users of foreign alternate and enlarge the officially recognised overseas trade market. Exchange charges within the Bureaux de Change are market determined. A parallel marketplace for international trade has been in existence for the reason that exchange management era. It has been established that scarcity in the official sector and bureaucratic procedures necessitated the expansion and growth of the parallel market.
