The FX market is a market for trading and exchanging any currency pair. The value (price) of one currency in terms of another currency is known as the ‘foreign exchange rate’. Exchange rate movements are determined by demand and supply for the currencies over time, based on trade value, capital flows and market expectations.
The Nigerian FX market consists of two dealing segments:
1. OTC Dealing : The critical market with many suppliers and market makers. Major participants include:
b. Authorised Dealers: financial institutions licensed by the CBN to make market in the FX markets.
c. Corporate and Retail End-Users
2. Bureau-de-Change: The market for retail cash transactions
The Nigerian FX market offers various products including Spot, Forwards, Swaps, Options and Futures. The USD/Naira ($/₦) currency pair is the most traded in the market, however, market makers also deal crosses including, but not limited to, Canadian Dollars (CAD), Swiss Francs (CHF), Euros (EUR), Pound Sterling (GBP), Japanese Yen (JPY) and South African Rand (ZAR).