Naira gains across markets as CBN sells dollar to BDCs

The naira on Monday continued its appreciation across the foreign exchange (FX) markets as the Central Bank of Nigeria (CBN) sold dollars
at N1,251 to the Bureau De Change (BDC) Operators.

The CBN in February 2024 promised to sell $20,000 weekly to BDCs at N1,301.

A circular from the CBN indicated that the apex bank directed the BDCs to sell to eligible customers at a rate not exceeding 1.5 percent above the purchase price.

The summary of the forex auction showed that the naira appreciated by 1.64 percent as the dollar was quoted at N1,408.04 on Monday, stronger than N1,431.49 quoted on Friday at the Nigerian Autonomous Foreign Exchange Market (NFEM).

Data from the FMDQ showed that the intraday high closed at N1,442 per dollar on Monday, stronger than N1,468/$1 closed at on Friday. The intraday low closed flat at N1,300 per dollar on Monday as against N1,301 closed on Friday at NAFEM.

The daily FX market turnover increased by 11.06 percent to $221.80 million on Monday from $199.71 million recorded on Friday.

The CBN circular reads, “We refer to our letter to you referenced TED/DIR/CON/GOM/001/071 in respect of the above subject wherein the CB approved a second tranche of sale of FX to eligible BDCs.

“We write to inform you of the sale of $10,000 to each BDC at the rate of N1,251/$1. The BDCs are to sell to eligible end users at a spread of not more than 1.5 per cent above the purchase price.”

Dollar rate on Monday crashed to N1,450, pushing up the value of the naira by 2. 07 percent as speculators offload hoarded foreign currency at the parallel market, popularly called black market.

The naira, which closed at N1,480 on Friday, appreciated to N1,450 on Monday, resulting in loss of money by many speculators who bought dollars at higher rates.

In February 2024, the CBN formalised dollar sale of $20,000 per BDCs.

This followed the on-going reforms in the foreign exchange market, aimed at achieving an appropriate market determined exchange rate for the Naira.

In a circular issued by the CBN on February 27, 2024, signed by Hassan Mahmud, Director of the Trade and Exchange Department, the bank expressed concern over ongoing price distortions in the retail market, contributing to widening exchange rate discrepancies in the parallel market.

In response, the CBN announced the approval of foreign exchange sales to eligible Bureau De Change to address the demand for invisible transactions. Each BDC is permitted to purchase $20,000 at a rate of N1,301/$ – representing the lower band rate of spot transactions executed at NAFEM on the preceding trading day (as of February 27, 2024).

All eligible BDCs were instructed to make Naira payments to designated CBN foreign currency deposit Naira accounts and provide payment confirmation along with necessary documentation for disbursement at specified CBN branches in Abuja, Awka, Lagos, and Kano.

This move contrasts with the CBN’s decision on July 27, 2021, under the leadership of Godwin Emefiele, the former governor, to halt foreign exchange sales to BDCs.

Emefiele cited BDCs engaging in wholesale FX trading exceeding USD 5000, violating their licenses and Nigeria’s FX regulations. He criticized BDCs for deviating from their intended purpose and instead facilitating corruption within the country.