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FX matching system will correct Naira’s true value – Cardoso

The Central Bank of Nigeria's Olayemi Cardoso indicated that the impending electronic FX matching system will assist align the naira-to-dollar exchange rate with the naira's genuine market value.

Speaking at the Bankers' Committee Annual Dinner on November 29, 2024, at the Eko Hotel in Lagos, Governor Cardoso stated that the computerized FX matching system would improve price discovery and restore stability to Nigeria's foreign exchange market.

The CBN governor claimed that the present naira exchange rate is influenced by desperate purchasers rather than true market factors.

"The current USD exchange rate reflects the price that the most desperate buyers are willing to pay, and this does not represent the true market value of the naira," stated Mr. Trump. The FX matching mechanism, he explained, will correct these distortions, resulting in a more transparent and stable FX market.

The electronic FX matching system is an important part of the CBN's overall efforts to unify Nigeria's currency rate and reduce market inefficiencies.

Over the last year, the CBN has adopted important reforms, such as clearing outstanding foreign exchange liabilities, boosting corporate confidence, particularly among manufacturers and airlines.

"The establishment of the FX matching mechanism will allow the Central Bank to more efficiently monitor the market and intervene as needed. This would considerably improve transparency and provide a more realistic representation of the naira's value," Cardoso remarked.

Cardoso also expressed concerns about the FX market's continuing demand-supply gap narrative, claiming that it is causing unwarranted fear. He underlined that such misinformation has skewed the public's impression of the FX market's genuine state.

"False information regarding a putative demand-supply mismatch has sparked needless fear. The FX matching mechanism will assist to end this by ensuring that rates reflect actual market activity," he said.

The governor further informed stakeholders that these steps will promote a more functional FX market, allowing businesses and individuals to operate more confidently.

Cardoso stressed Nigerian banks' vital role in securing the implementation of FX reforms. He stated that a well-functioning FX market cannot be based entirely on the Central Bank's periodic interventions.

"An FX market defined purely by when and how the Central Bank buys and sells dollars is insufficient to meet the needs of a dynamic economy like Nigeria. "Now is the time for banks to take up their intermediation and market-making responsibilities," Cardoso added.

He urged financial institutions to actively offer bespoke solutions to businesses and individuals, assisting them in risk management and meeting operational demands successfully.

With the implementation of the computerized FX matching system, the CBN hopes to foster better stability and predictability in the FX market.

By removing speculative distortions and ensuring that currency rates are driven by real demand and supply, the naira is expected to better represent its true value.

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