Naira stable in parallel market after CBN’s $7.85m sale to BDCs

The naira was stable at between N1550 and N1580 per US dollar in the black market on Friday after the sale of dollars to Bureau De Change (BDC) operators by the Central Bank of Nigeria (CBN).

The CBN on Thursday sold about $7.85 million to about 785 eligible BDCs that funded their accounts, BusinessDay learnt.

Each BDC received $10,000 as against the $20,000 weekly allocation earlier planned by the apex bank.

The CBN on Tuesday formalised dollar sales to 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.

A circular issued by the banking and financial institutions regulator on Tuesday stated that the CBN would offer a weekly allocation of $20,000 to each Bureau De Change at an exchange rate of N1,301 per dollar.

BDCs are permitted to sell to end-users with a margin not exceeding one percent above the purchase rate from the CBN.

The naira on Thursday appreciated against the dollar for the second straight day since the increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria.

The currency gained 0.90 percent on the day as the dollar was quoted at N1,595.11, stronger than N1,609.51 quoted on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data published by FMDQ Securities Exchange.

Dollar supply increased by 82.25 percent to $217.14 million on Thursday from $119.14 million recorded on Wednesday.

In a circular dated February 27, 2024, signed by Hassan Mahmud, director of the trade and exchange department, the CBN announced measures to tackle continuous price distortions in the retail market, exacerbating the exchange rate disparity.

The apex bank noted the persistent price distortions in the retail market, which have been fueling discrepancies in the parallel market, thereby widening the exchange rate premium.

Furthermore, the CBN directed all eligible BDCs to make Naira payments to designated CBN foreign currency deposit Naira accounts. Subsequently, they are required to submit confirmation of payment along with other necessary documentation for disbursement at designated CBN branches in Abuja, Awka, Lagos, and Kano.

These measures underscore the CBN’s commitment to addressing exchange rate distortions and stabilizing the forex market to promote economic stability and growth.