February 27, (THEWILL) – The Central Bank of Nigeria (CBN) has taken a decisive step to bridge the widening gap in the exchange rate and stabilize the forex market.
Through a new circular by Dr Hassan Mahmud, the Director of Trade & Exchange Department, the CBN has announced its decision to distribute $20,000 to each eligible Bureau De Change (BDC) operator across the country.
This initiative is part of the broader efforts to achieve a market-driven exchange rate for the Naira and alleviate the pressures feeding into the parallel market.
This allocation will be sold at a rate of N1,301/$, reflecting the lower band rate of executed spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as of the previous trading day, dated February 27, 2024.
This strategy is anticipated to inject much-needed liquidity into the market and stabilise the Naira’s value.
Also, the circular outlines specific guidelines for the BDC operators.
It stipulates that all BDCs are permitted to sell foreign exchange to end-users at a margin not exceeding one percent (1%) above their purchase rate from the CBN.
This measure is intended to prevent excessive mark-ups and protect consumers from price exploitation.
The circular reads:
“The CBN has approved the sale of foreign exchange to eligible Bureau De Change (BDCs) 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 at today, 27th February 2024).
“All BDCs are allowed to sell to end-users at a margin NOT MORE THAN one percent (1%) above the purchase rate from CBN.”
Eligible BDCs are mandated to deposit their Naira payments into designated CBN Foreign Currency Deposit Naira Accounts.
They must also provide confirmation of payment along with other necessary documentation to facilitate disbursement at the appropriate CBN branches located in Abuja, Awka, Lagos, and Kano.
This strategic intervention by the CBN is expected to enhance the efficiency of the foreign exchange market, providing a more transparent and equitable platform for the trading of the Naira.
By directly addressing the retail market’s distortions, the CBN aims to foster a more stable economic environment conducive to growth and development.
THEWILL recalls that the CBN has made a number of significant reforms towards addressing Naira depreciation.
These include probing and clearing FX backlog, limiting forex for foreign education and medical tourism, increasing BDCs’ minimum share capital, curbing FX speculators and reviewing the operations of International Money Transfer Operators (IMTOs) among others.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
