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The Central Bank of Nigeria (CBN) has announced the resumption of dollar sales to Bureau De Change (BDC) operators, after a three-year hiatus. This move is aimed at stabilizing the naira and reducing the gap between the official and unofficial exchange rates.
According to a circular published on Tuesday, the CBN will sell $20,000 weekly to each BDC at a rate of N1,301/$. BDCs are then allowed to sell to end-users at a margin not exceeding one percent above the purchase rate from the CBN.
Following the announcement, the naira appreciated to N1,590 per dollar on the streets, with traders anticipating further gains by the end of the trading day.
On Monday, the currency had already gained 5.22 percent, trading at N1,582.94 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The CBN’s decision to resume dollar sales to BDCs is seen as a response to speculators in the black market. Although the sales to BDCs are at relatively low volumes, it is expected to have a significant impact on the activities of USD speculators.
In a circular dated February 27, 2024, the CBN acknowledged the price distortions at the retail end of the market, which have been contributing to the widening of the exchange rate premium.
The central bank approved the sale of foreign exchange to eligible BDCs to meet the demand for invisible transactions. Each BDC will be sold $20,000 at the rate of N1,301/$, based on the lower band rate of executed spot transactions at NAFEM.
To facilitate the process, eligible BDCs are directed to make the Naira payment to the designated CBN foreign currency deposit Naira accounts and submit confirmation of payment, along with other necessary documentation, for disbursement at the appropriate CBN branches in Abuja, Awka, Lagos, and Kano.
The CBN had discontinued the sale of foreign exchange to BDCs in July 2021, accusing them of trading in excess of their licenses and Nigeria’s FX regulations.
The resumption of dollar sales to BDCs marks a shift in the CBN’s approach to tackle the challenges in the foreign exchange market.
