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CBN Considers Limiting Cash Payments for Foreign Currencies

by Vicky Oselumese
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CBN Considers Limiting Cash Payments for Foreign Currencies

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The Central Bank of Nigeria (CBN) is proposing to limit the cash payment for buying and selling foreign currencies by Bureau De Change (BDC) operators to a maximum of $500. The aim is to encourage digital payments for transactions exceeding this amount. The CBN recently published its proposed revised regulatory guidelines for BDC operators in Nigeria, which include the requirement for electronic transfers or purchases of foreign currencies to be made to BDCs’ naira accounts.

According to the proposed guidelines, payments to customers for cash purchases of foreign currency above $500 will be made through transfer to the customer’s Naira bank account. For non-resident customers, a BDC will issue a prepaid NGN card.

Cash payments for foreign currency purchases of $500 and below will still be permissible. The CBN has outlined permissible and non-permissible activities for BDCs.

Permissible activities include acquiring forex from approved sources, selling FX in line with CBN guidelines, and serving as cashout points for International Money Transfer Operators (IMTOs).

On the other hand, BDCs are prohibited from engaging in street trading, account maintenance, accepting deposits and granting loans, facilitating international outward transfers, dealing in precious stones and metals, establishing subsidiaries, and other activities.

The proposed regulation aims to sanitize BDC operations, enhance the monitoring of forex inflows and outflows, and curb illicit flow of foreign currencies in the economy.

It also seeks to address the perceived “dollarization” of the Nigerian economy, where businesses prefer receiving payment in USD instead of the local currency.

The CBN believes this behavior contributes to the increased demand for foreign exchange in the country. The CBN has been implementing various initiatives to boost liquidity in the forex market and stabilize the value of the naira, which has been experiencing significant depreciation. The proposed regulation is subject to review and is part of the CBN’s efforts to ensure a more transparent and efficient foreign exchange market in Nigeria.

Governor of the CBN has urged Nigerians to moderate their demand for foreign exchange, highlighting the significant amount spent on medical tourism and education abroad, which has put pressure on the country’s foreign exchange reserves.

This article was updated 2 months ago

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