Naira opens steady after CBN hammer on BDCs

The Naira is holding steady to the dollar in FX markets Wednesday after the Central bank of Nigeria halted the sale of foreign exchange to the over five thousand Bureau De changes across the country, citing wholesale abuse by the BDCs. Wednesday’s action by the apex bank means BDCs will no longer get the about $5.28bn supply annually they hitherto were supplied by the central bank.

On abokifx.com, a reliable measure for the rate for the Naira, trade opened at N505 to the USD for those buying and N500 for those who were selling dollars. It was at this same level the Naira closed opened on Tuesday before the CBN action and traders say there has so far been no panic buying or renewed pressures on the local currency as some analysts expected.

The Naira traded at N504 to the dollar at markets’ opening on Monday. The British pound sterling on the other hand is trading at N703, the same level it traded when the market opened on Monday.

Sentiments are subdued and the Naira appears to be finding support in the reports that the CBN had released an initial $200 million to the banks to meet the retail needs of their customers.

The banks are also continuing to improve sale of PTA and BTA to customers who can now get their requests met in matter of hours.

At Citi Bank for instance, even non-account customers who arrive the bank at 8am each day, are able to purchase their PTA on the spot.

Late on Tuesday, the Central Bank released a total of $200 million to all commercial banks in the country as part of efforts to meet dollar demand for legitimate end users in the country.

This followed the decision by the regulator to henceforth discontinue foreign exchange (FX) sale to Bureau De Change (BDC) operators in the country.

According to a senior central bank official all banks customers that require FX for legitimate transactions such as school fees, Personal Travel Allowance (PTA), Basic Travel Allowance (BTA) and medical payments would be required to undergo minimal documentation to assess the greenback.

Earlier yesterday CBN Governor, Mr. Godwin Emefiele, announced the end of FX sales to BDCs when he was briefing journalists at the end of a two-day meeting of the Monetary Policy Committee (MPC) in Abuja.

Emefiele directed all commercial banks to immediately create designated branches for the sale and disposal of FX to customers who deserve it for legitimate purposes. He said the CBN will no longer process or issue new licences for BDC operations in the country, adding that all licences being currently processed, regardless of the stage, had been suspended.

He said the CBN would now channel weekly FX allocations hitherto meant for BDCs to commercial banks.

Emefiele said commercial banks were now permitted to begin accepting FX cash deposits from their customers.

He explained that the measures were to ensure that the apex bank was better able to carry out its mandate in an effective and efficient manner as well as to guarantee preservation of the commonwealth and financial system stability.

Emefiele said the decision to eliminate the BDC operators from the FX market was necessitated by their dubious and unwholesome practices, adding that the operators have gone beyond their primary role of being retail dealers of FX to wholesale dealers.

According to him: “In total disregard for the policies that the CBN introduced to meet its mandate of safeguarding the value of the naira, we have continued to observe that stakeholders in some sectors have not been helpful in this direction.

“In particular, we have noted with disappointment and great concern that our BDC operators have abandoned the original objectives of their establishment, which was to serve retail end users who need $5,000 or less.

“Instead, they have become wholesale dealers dealing in forex to the tune of millions of dollars per transaction. Despite the fact that Nigeria is the only country in the world today where a central bank sells dollar directly to BDC operators.”

He added, “Operators in Nigeria’s bureau de change segment have not reciprocated the bank’s gesture to help maintain price stability to the large market.”