CBN formalises dollar sales to BDCs as naira gains

The Central Bank of Nigeria (CBN) has formalised dollar sales to Bureau De Change (BDCs) operators after a three-year break in a move aimed at stabilising the naira and narrowing the gap between the official and unofficial exchange rates.

The CBN will sell $20,000 weekly to each BDC at a rate of N1,301/$, according to a circular published Tuesday. The BDCs are allowed to sell to end-users at a margin not more than one percent above the purchase rate from CBN.

The naira appreciated to N1,590 per dollar on the streets, Tuesday morning, after the announcement of dollar sales to BDCs by the CBN, with traders expecting the naira to gain further at the close of trading today.

The currency also gained by 5.22 percent on Monday, trading at N1,582.94 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ Securities Exchange indicated.

“About time the CBN fights back against the speculators in the black market, albeit the sales to BDCs are at low volumes,” a source familiar with the matter said.

“If we get the larger rate increase we expect today, then it is huge losses for the USD speculators,” the source said.

In the CBN’s circular dated February 27, 2024, and signed by Hassan Mahmud director, trade and exchange department, the apex bank said it has observed the continuous price distortions at the retail end of the market, which is feeding into the parallel market end further widening the exchange rate premium.

“To this end, 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),” the circular said.

All eligible BDCs are directed to make the Naira payment to the designated CBN foreign currency deposit Naira accounts and submit confirmation of payment, with other necessary documentation, for disbursement at the appropriate CBN Branches – Abuja, Awka, Lagos and Kano).

On July 27, 2021 the CBN under Godwin Emefiele, former governor, discontinued the sale of foreign exchange to BDCs accusing them of trading FX wholesale that amounts greater than USD 5000, in contravention of their licences, and Nigeria’s FX regulations.

The former CBN governor then said, the BDCs turned themselves away from their objectives and have now become agents that facilitate graft and corruption in the country.