Few days after the Central Bank of Nigeria, CBN, sold about $122.67m to 46 authorised dealers, the apex bank, Thursday, announced that it has resumed sale of foreign exchange to eligible Bureau De Change, BDC operators.
This was as the naira fell to 1,570/$ at the parallel market with the CBN selling the dollar to BDCs at a rate of 1,450/$.
In a statement signed by AA Mahdi for the acting director of the Trade and Exchange Department at the CBN, the apex bank, while warning BDCs to sell to eligible end-users at a margin not more than 1.5 per cent above the purchase rate from CBN, said its action was aimed at strengthening the naira through the achievement of a more appropriate exchange rate which would be determined by real-life market.
The statement read: “Following the ongoing reforms in the foreign exchange market, with the objective of achieving an appropriate market-determined exchange rate for the naira, the Central Bank of Nigeria” has observed the continued distortions in the retail end of the market.
“To this end, the CBN has approved the sale of FX to eligible Bureau de Change to meet the demand for invisible transactions. The sum of $20,000 is to be sold to each BDC at the rate of N1,450 (representing the lower band of the trading rate at NAFEM in the previous trading day).”
Meanwhile, BDC operators had reportedly disclosed that the naira was trading between 1,620/$ and 1,630/$ on the black market, after it recently traded for a rate as low as 1,640/$, and thereafter settled at 1,570/$ at the parallel market, having closed Wednesday’s trading at 1,565/$.
In another disclosure, the London Stock Exchange Group which recently released its data said that the naira fell to a four-month low of 1,612.50/$ on the official market on Wednesday.
On his part, President of the Association of Bureau de Change of Nigeria, Aminu Gwadebe, who spoke with newsmen, blamed the decline on what he described as acute shortages, speculative activity, public hedging to guide inflation, and the surge in demand from recent duty waivers on certain critical food imports.
According to Gwadebe, the rate had since started to retreat, and that it came down from N1640/$ to N1570/$ while the trajectory remained positive. While he spoke on the resumption of the sale of forex to BDCs, the association’s president said that the sale of $20,000 to BDCs would ease liquidity in the market adding that, the move was commendable and a manifestation of the policy stress test in addressing the various challenges confronting the retail end FX market.
Reports have also indicated that the naira closed trading on Thursday, on the official National Autonomous Foreign Exchange Market at 1,566.82/$ with a turnover of $273.14m; an improvement from Wednesday’s 1,581.65/$ with a daily turnover of $108.16m.
Gwadebe noted that it will help to induce liquidity and enhance confidence in the market, adding that, the surge in demand pressure through the recent fiscal policies of duty waiver and removal of import duty on certain basic needs will surely be augmented by this review of the sales of FX back to the BDCs.
While urging members of the association to comply with regulations for the survival and continuing sub-sector, he said, “The BDCs will continue to play their third-level roles in the retail end of the market and will remain the potent and most effective tool of the CBN’s demand monitoring mechanism and meet the critical liquidity needs in the Fx market.
“I also called on the Government to continue to collaborate with stakeholders in their strategy and tactics to tackle the challenges facing the country. I also appeal to the CBN to continue to look into our appeals in allowing all our members illegible and Eligible to come together and form new partnerships in line with their new regulations 2024 on BDCs. We believe that will make the market liquid and stable,” he added.
