Operational Issues Related to the Functioning of Interbank Foreign Exchange Markets in Selected African Countries

April 1, 1994

Preview Citation

Format: Chicago

Yin-Fun Lum, and Calvin A McDonald. Operational Issues Related to the Functioning of Interbank Foreign Exchange Markets in Selected African Countries, (USA: International Monetary Fund, 1994) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper discusses the main operational issues involved in the implementation of interbank foreign exchange systems in selected African countries. The countries considered are The Gambia, Ghana, Kenya, Mozambique, Nigeria, and Sierra Leone. The paper finds that exchange rates in these markets tend to be determined through transactions between dealers and clients at the retail level, for the most part, rather than through wholesale interdealer transactions. Additionally, many factors continue to limit the full development of these markets. In particular, informational problems limiting “real time” quotes, inadequate competition in the market, and insufficient regulations to reduce exchange rate risk and encourage “true” interdealer transactions. Despite these limitations, the markets studied have improved the efficiency of foreign exchange allocation and substantially narrowed exchange rate differentials between the official and parallel markets.

Subject: Banking, Commercial banks, Currency markets, Exchange rates, Financial institutions, Financial markets, Foreign exchange, Interbank markets

Keywords: Allocation mechanism, Auction rate, Bureau market, Central bank of Nigeria, Client transaction, Commercial banks, Currency markets, Exchange rates, Foreign currency, Foreign exchange arrangement, Foreign exchange bureau, Foreign exchange resource, Foreign exchange surrender requirement, Global, Interbank markets, Market distortion, Market rate, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/048
Stock No:

WPIEA0481994
ISBN:

9781451972290
ISSN:

1018-5941

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