After describing the concept and scope of the second-tier foreign exchange market (SFEM), the author examines the mode of operations as defined by the guidelines released by the Central Bank of Nigeria (CBN). As currently structured, SFEM is meant to operate through the mediums of the weekly bidding and price fixing sessions between authorized dealers and the CBN, the dealings among authorized dealers themselves, and dealings between the public and authorized dealers. Some of the primary effects of the introduction of SFEM for Nigerian banking are likely to include changes in the regulatory environment, facilitating growth in external transactions, developing skills in foreign exchange and naira funds management, developing an effective interbank foreign exchange market, and creating a more competitive and favourable banking environment. Bibliogr.
