The Nigerian naira has experienced a significant appreciation against the U.S. dollar, gaining N125 within a month following the implementation of the Electronic Foreign Exchange Matching System (EFEMS). On December 2, 2024, the official exchange rate was N1,660 to the dollar; by January 3, 2025, it had strengthened to N1,535, marking an 8% improvement.

EFEMS, introduced by the Central Bank of Nigeria (CBN) on December 2, 2024, aims to enhance transparency and efficiency in the foreign exchange market. This fully electronic platform provides real-time pricing and visibility of buy and sell orders, automating the matching of orders to ensure transactions occur at the most competitive prices available. By reducing the chances of price manipulation and market distortions, EFEMS curtails speculative trading and mitigates volatility.

The naira’s recent appreciation follows a turbulent year in 2024, during which the currency lost 40.9% of its value against the dollar in the official market, despite an increase in external reserves. The introduction of EFEMS represents a significant shift towards a more transparent and efficient foreign exchange trading environment in Nigeria.

While EFEMS has delivered promising results, industry experts acknowledge that challenges remain. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), noted that the unregulated black market continues to pose significant hurdles. He stated, “The measures taken by the CBN are yielding some positive results, but it is a work in progress.”

In summary, the naira’s appreciation by N125 against the dollar within a month of EFEMS’ launch signifies a positive development in Nigeria’s foreign exchange market, reflecting the potential benefits of enhanced transparency and regulatory reforms.

Source: Business Day

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