This change is a big deal for Nigeria’s foreign exchange market, as confirmed by the Central Bank of Nigeria (CBN).
The CBN reported that the naira appreciated by 8 percent, with the dollar priced at N1,535 on January 3, 2025, down from N1,660 on December 2, 2024, which was the official start of EFEMS trading.
The CBN first introduced EFEMS on October 3, 2024, as part of a broader effort to tackle speculation and boost transparency in the foreign exchange market. This system is tailored for authorized dealers in the Nigerian Foreign Exchange Market (NFEM) and went live on December 2, 2024, after a successful two-week trial in November.
EFEMS is a fully electronic platform that offers real-time pricing and visibility for buy and sell orders. By automating the order matching process, it helps ensure transactions happen at the best prices, cutting down on price manipulation and other market issues.
Additionally, the system helps limit speculative trading and reduces the volatility that often comes with it. It also enhances regulatory oversight, providing better monitoring of FX activities and ensuring that all trades are done in a transparent and well-regulated environment.
Nigeria's foreign exchange market used to depend on manual or semi-automated trading methods, which often led to inefficiencies and risks of manipulation. With the launch of EFEMS, those issues are a thing of the past. The new system centralizes all transactions on a single regulated platform, providing real-time visibility and smooth processing. This change paves the way for a more transparent and efficient trading environment.
Olayemi Cardoso, the governor of the CBN, emphasized the importance of this reform, saying, “Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets.”
While EFEMS has delivered promising results, industry experts stress that challenges remain. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), acknowledged the CBN’s progress in stabilising the foreign exchange market but pointed out that the unregulated black market continues to pose significant hurdles. “The measures taken by the CBN are yielding some positive results, but it is a work in progress,” Yusuf explained. “Speculators and manipulators in the market are constantly devising new tricks, so this must be a continuous effort.”
The naira has recently gained some ground after a pretty rough year filled with ups and downs. In 2024, the currency took a big hit, dropping 40.9 percent in value against the dollar in the official market, even though external reserves were on the rise. This drop highlighted the ongoing issues in Nigeria’s currency market, despite attempts to stabilize the economy.
The EFEMS initiative is still getting off the ground, but it’s a crucial move towards tackling these problems. If it can help cut down on market distortions, boost transparency, and rebuild investor trust, it could be key to achieving lasting stability in Nigeria’s foreign exchange market.