BOOM: FMDQ Suspends Spot FX Closing Rate, Confirming Flexible Exchange Rate Is Broken
The FMDQ OTC, the official market for bonds, treasury bills and forex trading has approved the suspension of the FMDQ Spot FX Closing Rate with immediate effect.
The FMDQ in a press release signed by Jumoke Olaniyan, the Divisional Head Market Development & Regulation, explained the reason for the suspension was due to the “transparency and liquidity challenges, and prevalent disequilibrium currently being faced in the Nigerian Foreign Exchange”.
Rather than publish the daily Spot FX closing rates, the FMDQ will now reference the last available executed trade on the Thomson Reuters NGN=D1 module at 2:00 PM and will be referenced the “CBN Closing Rate”.
This remarkable development is perhaps the first official sign that the flexible exchange rate introduced by the Central Bank of Nigeria is broken. The Managing Director of the FMDQ, Koko Onadele, had rebuked the CBN for fragmenting the exchange rate market with its tight control of forex prices and supply.
This latest press release follows a situation where the country now has about 7 official/unofficial exchange rate making the FMDQ spot quote basically irrelevant.