FMDQ Introduces 2-Way FX Market To Stabilize Naira Exchange

The Financial Markets Dealers Quotation (FMDQ) has introduced a 2-Way FX market, an initiative which is expected to strengthen the naira exchange and stabilise the market.

Taking cues from Nigerian Exchange Group, where stockbrokers implement a stoppage once a particular percentage is surpassed, sources told THISDAY that on Friday, that the 2-Way FX Market imposes a minimum amount threshold, market operators would be mandated to quote both on their buying and selling prices with a fixed N50 spread.

This would require banks to disclose their selling price before making a purchase, contributing to increased transparency and fair trading practices.

Furthermore, in a move to mitigate excessive volatility, the 2-Way FX Market incorporates a circuit breaker mechanism as it has adopted a -/+5 percent band around the previous day’s NAFEX rate.

This preventative measure ensures that daily exchange rate movements do not exceed five percent. The directive also stated that a standard ticket size of $100,000 would be adopted.

Analysts applauded the initiative but noted that the efficacy of the measures hinges on a balanced market with a substantial number of buyers and sellers.

Commenting on the initiative, Head of Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi said: “In stock exchanges, there is a minimum amount and once it passes a particular percentage, they can say you should stop trading on a particular share.

“Banks need to quote how much they are buying and how much they are selling and it must be with N50 spread. In other words, to have to first quote how much you are selling before buying.

“Also to avoid volatility, there would be a circuit breaker of -/+5% band around the previous day’s NAFEX meaning that the exchange should not move more than five percent in a day.

“This is to bring a bit more transparency. But if there is not enough activity in the market and the circuit breaker stops trade, it may cause people to go outside the market to settle transactions.”

Meanwhile, THISDAY on Friday, showed that BDC operators who had been arrested for over two days in Lagos have not been released, even as security agencies continued their arrest of the foreign currency traders.

An operator told THISDAY that his colleagues were yet to be released, adding that most of the BDC operators were conducting their businesses with clients they know secretly.

However, the naira on Friday remained stable at the parallel market closing at N1,700/ $1, while the official market saw decline.

The Nigerian Autonomous Foreign Exchange (NAFEM) closed on Friday at N1665.5/$1 compared to N1,571.31/$1 it closed on Thursday.

Notably, on Friday recorded a daily turnover of $151.93 million, the highest spot rate recorded on Friday was N1805 while the lowest spot rate recorded was N1,301.

James Emejo and Nume Ekeghe