- The Central Bank of Nigeria (CBN) approved the sale of $20,000 worth of forex to eligible BDC operators at the official rate of N1,590/$
- The forex sale is the second by the CBN in September and the seventh in the year
- Forex sales are part of the CBN’s efforts to ensure forex stability
The Central Bank of Nigeria (CBN) has announced the approval to sell $20,000 worth of foreign exchange (forex) to each of the 1,583 eligible Bureau De Change (BDC) operators at the official rate of N1,590/$.
The CBN said the move is to bolster the foreign exchange market, ease the pressure on the naira and meet the retail demand for eligible invisible transactions which are transactions related to personal travel allowances (PTA), business travel allowances (BTA), tuition fees and medical bills.
This is contained in a circular released on Wednesday, September 26, signed by the acting Director of the Trade and Exchange Department of the CBN, Dr W.J. Kanya.
The CBN also stated that BDCs will be allowed to sell foreign exchange to eligible end-users at a margin of no more than one per cent above the purchase rate from the CBN. This means the profit for BDCs can’t be more than N15.59 on each dollar they sell to customers.
The circular added that BDCs interested in the sale must follow established guidelines, including making naira payments to the CBN deposit account numbers and submitting all required documentation for disbursement at designated CBN branches in Abuja, Awka, Kano and Lagos.
It reads, “This is to inform the Bureau De Change (BDC) operators and the general public that the CBN will be providing additional liquidity to this segment of the foreign exchange market.
“To this end, the CBN has approved the sale of US$20,000.00 to each eligible BDC at the rate of N1,590/$. This is to meet the demand for invisible transactions.
“All BDCs are allowed to sell to eligible end-users at a margin of not more than one percent (1%) above the purchase rate from CBN.
“Eligible BDCs interested in this transaction are directed to make the naira payment to the CBN deposit account numbers with them. Also, payment confirmation and all necessary documentation for disbursement are to be submitted at the appropriate CBN branches (Abuja, Awka, Kano and Lagos) for collection of the US$20,000.00.”
CBN has sold forex to BDCs twice in September and seven times this year
The CBN’s forex intervention comes amid growing concerns over the scarcity of forex in the retail segment of the market, where many Nigerians face difficulties meeting their personal and business financial obligations abroad.
The latest intervention is the second from the apex bank in September, the first being on September 6 at the rate of N1,580.
The latest sales may cost the CBN $31.66 million while both sales in September may cost the CBN up to $63.32 million as the sales are to 1,583 BDCs. The bank has also intervened in the forex seven times this year.
CBN has been making efforts to stabilise forex
With the continued depreciation of the naira against other convertible currencies, especially the greenback, the CBN has been making efforts to address liquidity issues in the foreign exchange (FX) market one of which is the sale of forex to authorised dealer banks and BDCs.
As of Wednesday, September 25, the naira sold for N1,667.42 at the Nigerian Autonomous Foreign Exchange (NAFEM) window, which is a N9 or 0.53 per cent decline from the N1,658 it recorded on Tuesday, September 24.
In H1 2024, the CBN sold forex to BDCs at least four times, while directing the operators to sell at a spread not more than 1.5 per cent above the CBN rate, which was part of efforts to save the naira.
Some other policies rolled out by the CBN to stabilise the currency include asking banks and International Money Transfer Operators (IMTOs) to halt dollar payments of inbound transfers to customers in Nigeria.
In a revised guideline to IMTOs and banks on January 31, 2024, the CBN said all inbound money transfers to Nigeria will be paid only in naira through a bank account or in cash at the prevailing rate in the Nigerian FX market.
To allow for flexible currency quoting and to address suspected cases of FX speculations and hoarding, the CBN, in January, removed the exchange rate caps quoted by IMTOs.
The policy required IMTOs to quote rates within an allowable limit of -2.5 per cent to +2.5 per cent around the previous day’s closing rate of the Nigerian FX market.
To ensure forex stability and to curb alleged cases of forex speculation and hoarding by banks, the CBN had mandated deposit money banks (DMBs) to sell off excess dollar stock by February 1.
At the peak of the forex crisis in February, the Office of the National Security Adviser (ONSA), the CBN and key law enforcement agencies had collaborated to clampdown on forex speculators in the country, leading to the arrest of two executives of a crypto exchange platform, Binance.
On March 20, the CBN announced that it had cleared valid forex backlog to the tune of $7 billion to ensure forex liquidity.
For International Oil Companies (IOCs), the CBN had issued a guideline that stopped them from remitting 100 per cent of their inflows but to instead sell 50 per cent balance of repatriated export proceeds to authorised forex dealers.
Another masterstroke by the apex bank is its policy of Monday, June 24, granting IMTOs access to naira directly from the CBN window or through authorised dealer banks (ADBs) to settle transactions for the sale of FX in the market.
It said the measure is part of its commitment to enhancing local currency liquidity, ensuring the smooth functioning of the FX markets, improving formal remittance channels and “widening access to local currency liquidity for the settlement of diaspora remittances.”
Q3 2024: Economists expect naira stability, fuel price hike, increased govt borrowing, others
Meanwhile, TheRadar reported that as the third quarter (Q3) of 2024 progresses, analysts have projected key economic occurrences that will define the quarter.
Among the projections are the relative stability of the naira even as it has sustained downward trading, expected hike in the price of Premium Motor Spirit (PMS) and continued borrowing by the government to finance projects.
