The FMDQ-OTC, where money market instruments including forex are traded over the counter has reversed itself on its suspension of the closing rate methodology.
On Monday, the FMDQ announced that it had suspended the publication of FMDQ spot foreign exchange closing rate based on “transparency and liquidity challenges, and prevalent disequilibrium currently being faced in the Nigerian Foreign Exchange (“FX”) market, and in order to protect the integrity of the FMDQ Spot FX Closing Rate Methodology”.
However, it has now made a U-turn claiming that it had taken this decision was based on the fact that it had now ‘received reasonable assurance that Dealing Member (Banks) [DMBs]/Authorised Dealers will promptly update their inter-Member trades and trades with clients on the designated FX Trading Systems accordingly.”
Critics however believe the decision to reverse this claim was due to pressures from the Central Bank officials who may have seen this has a major blow to the credibility of the their flexible exchange rate policy. Some believe, some of the concerns raised by the FMDQ still exist and could not have been fixed within 48 hours.
Some analysts also opine that the statement by the FMDQ explaining why they lifted the suspension is a further confirmation that the market was not transparent as closing prices never indeed reflected the true market price of the exchange rate.
Nairametrics also reported on Tuesday that the CBN was mulling sweeping changes to the Foreign Exchange, Monitoring and Miscellaneous Exchange Act that could increase its control over a market that is seeking to be free from Government control.
See the new circular below;