The Central Bank of Nigeria (CBN) has announced the sale of $10,000 to each licensed Bureau De Change (BDC) operator nationwide. This marks the second such intervention this month by the apex bank.
In a circular addressed to the President of the Association of Bureau De Change Operators (ABCON), the CBN outlined the details of the intervention. BDCs will be able to purchase dollars at the rate of N1,021 per dollar.
They are then authorized to sell this forex to eligible end users at a maximum spread of 1.5 per cent above the purchase price, translating to a maximum selling price of N1,036.15 per dollar.
On the 8th of April 2024, the CBN sold $10,000 FX to each of the 1,588 participating BDCs at a fixed rate of N1101 per US dollar at a spread capped at 1.5 per cent above the purchase price from the CBN (approximately N1,116.15 per dollar). This limited the potential profit BDCs could make on each transaction
The latest circular has instructed all eligible BDCs to commence immediate payment of the Naira equivalent for their allocated $10,000 into designated CBN Naira Deposit Accounts.
This deposit must be accompanied by the submission of necessary documentation to facilitate the disbursement of forex at respective CBN branches.
The latest intervention by the CBN is likely to be met with cautious optimism by market participants. The continued injection of US dollars into the BDC segment aims to improve access to forex for legitimate transactions, potentially alleviating some pressure on the parallel market.
The effectiveness of this strategy hinges on several factors: the extent to which the allocated amount meets the current demand for forex remains to be seen; strict adherence to the stipulated maximum selling price by BDCs is crucial for ensuring transparency and preventing market distortions; and while stop-gap measures like these can provide temporary relief, addressing the underlying causes of forex scarcity is essential for achieving long-term market stability.
The CBN’s recent actions since February 2024 highlight its ongoing efforts to manage forex liquidity and ensure the smooth functioning of the foreign exchange market. The success of this strategy will depend on continued monitoring, adjustments as needed, and fostering a more market-driven approach to forex allocation in the long run.
