In a bid to address price distortions and enhance market stability, the Central Bank of Nigeria (CBN) announced on Tuesday its approval of the sale of Foreign Exchange (FX) to eligible Bureau De Change (BDC) operators.
According to the circular dated February 27, 2024, issued by Dr. Hassan Mahmud, Director of the CBN’s Trade and Exchange Department, each BDC will have access to $20,000 at the rate of N1,301/$, reflecting the lower band rate of executed spot transactions at the Nigeria Autonomous Foreign Exchange Market (NAFEM) as of February 27, 2024.
The intervention aims to mitigate ongoing price distortions at the retail end of the market, which have been contributing to parallel market fluctuations and widening the exchange rate premium. This move aligns with the CBN’s ongoing efforts to achieve a market-determined exchange rate for the Naira.
However, the CBN stressed that BDCs are permitted to sell to end-users at a margin not exceeding one percent above the purchase rate from the central bank.
Eligible BDCs are required to make Naira payments to designated CBN Foreign Currency Deposit Naira Accounts and submit payment confirmation along with necessary documentation for disbursement at designated CBN branches in Abuja, Awka, Lagos, and Kano.
Simultaneously, the CBN released an updated list comprising 1,368 licensed BDCs operating across the country, with the majority domiciled in Lagos, Kano, Abuja, and Akwa.
This intervention signals the CBN’s commitment to bolstering market liquidity and ensuring currency stability, as part of its mandate to uphold the value of the local currency, stabilize the financial system, and fortify external reserves.
The weekly intervention totaling $27.36 million, and an estimated annual intervention of $328 million, underscores the central bank’s proactive measures to address FX challenges and maintain economic equilibrium. This move corroborates earlier reports indicating the CBN’s intention to resume FX interventions through BDC operators.