Things to know as CBN begins sales of dollars to BDCs

The Nigerian Central Bank has declared its intention to offer foreign exchange valued at $20,000 to all qualified Bureau De Change operators nationwide.

This occurred more than two years after Godwin Emefiele, the suspended former governor of the CBN, halted the selling of foreign currency to BDC operators in that particular forex market segment.

The top bank revealed this in a fresh circular released on Tuesday bearing the signature of Hassan Mahmud, Director of the Trade and Exchange Department.

The circular titled, “Sale of Foreign Exchange to Bureau de Change Operators to meet retail demand for eligible invisible transactions,” said the move aimed at rectifying the persisting distortions in the retail segment of Nigeria’s foreign exchange market and bridging the widening gap in the exchange rate.

According to the statement, the allotment will be sold for N1,301/$, which reflects the lower band rate of spot transactions completed at the Nigerian Autonomous Foreign Exchange Market as of the previous trading day, which was February 27, 2024.

The circular read, “Following the ongoing reforms in the foreign exchange market, aimed at achieving an appropriate market-determined exchange rate for the Naira, the Central Bank of Nigeria has observed the continued price distortions at the retail end of the market, which is feeding into the parallel market and further widening the exchange rate premium.

“To this end, the CBN has approved the sale of foreign exchange to eligible Bureau De Change to meet the demand for invisible transactions. The sum of $20,000 is to be sold to each BDC at the rate of N1,301/$- (representing the lower band rate of executed spot transactions at NAFEM for the previous trading day, as of today, February 27, 2024).

“All BDCs are allowed to sell to end-users at a margin NOT MORE THAN one per cent (1 per cent) above the purchase rate from CBN.”

It also instructed qualified BDCs to deposit Naira into the appropriate CBN Foreign Currency Deposit Naira Accounts and provide proof of payment along with other required paperwork.

“All eligible BDCs are directed to make the Naira payment to the designated CBN Foreign Currency Deposit Naira Accounts and submit confirmation of payment, with other necessary documentation, for disbursement at the appropriate CBN Branches ABUJA, AWKA, LAGOS and KANO,” it added.

The CBN has implemented several significant reforms to address Naira depreciation in a desperate attempt to stop the currency’s free fall. These include but are not limited to clearing the FX backlog, restricting the use of foreign exchange for medical and educational travel, raising the minimum share capital requirements for BDCs, and cracking down on FX speculators.

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