Naira reverses losses after CBN’s tweak to FX rule on remittances

Nigeria’s currency gained 4 percent against the dollar on Tuesday after the Central Bank (CBN) made amendments to the foreign exchange rule on remittances to boost liquidity.

The naira, which had closed at a four-year low of N510 on Monday, clawed back some of the losses by trading at N490 on the black market, according to data collated from traders by BusinessDay.

The local currency is expected to firm further as over 5,000 Bureaux De Change (BDCs) are to receive dollar disbursement from the CBN today.

On Monday, the CBN said beneficiaries of diaspora remittances through the international monetary transfer operators (IMTO) shall now have such inflows in foreign currency (US Dollar) through the designated bank of their choice.

The apex bank in a statement on Monday, signed by O.S. Nnaji, director of trade & exchange of CBN, said recipients of such remittances may have the option of receiving these funds in foreign currency cash or into their domiciliary account.

Aminu Gwadabe, President of Association of Bureau De Change Operators of Nigeria (ABCON) said those hoarding dollars should sell now otherwise they will lick their wounds.

“And the monopoly is broken and induce liquidity in the BDC subsector,” Gwadabe said.

At the Investors and Exporters (I&E) forex window, the market opened with an indicative rate of N391.70k on Tuesday, signaling N1.35k loss when compared with N390.35k opened with on Monday, data from FMDQ revealed.

Volumes traded in the I&E FX market dipped further for a second consecutive session on Monday, dropping by 65% to close at only $35million in value traded, and leaving the closing rate unchanged at N390.25/$. The Apex bank once again intervened in the market, selling about $41million around N390.00/$ (N2.25 lower D/D) to foreign portfolio investors looking to exit the Nigerian markets, according to analysts at Zedcrest capital Limited.

The CBN statement reads, “these changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora remittances into Nigeria”.

“In addition, these changes would help finance a future stream of investment opportunities for Nigerians in the Diaspora, while also guaranteeing that recipients would receive a market reflective exchange rate for the market.”

The apex bank also noted that beneficiaries shall have unfettered access and utilisation to such foreign currency proceeds, either in cash and or in their domiciliary accounts.

The CBN had on February 23, 2020, explained that only electronic fund transfers into Domiciliary accounts can also be transferred from such accounts while cash deposits into such accounts can only be withdrawn in cash also.