CBN sells dollars to BDCs at N1,251/$1 as naira regains strength
The Central Bank of Nigeria has issued a circular to Bureau De Change operators (BDCs), informing them that it has sold $10,000 to each BDC at a rate of N1,251/$1.
In a circular issued by the CBN, each BDC was instructed to sell the dollars to eligible customers at a rate not exceeding 1.5 percent above the purchase price.
The 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.”
This confirms the resumption of dollar sales to BDC operators after a prolonged period of suspension by the central bank in 2021.
The ban was lifted earlier in the year following the revocation of licences of over 4173 BDC operators in February.
Investigations reveal that the exchange rate fell below N1,400/$1 in the parallel market after closing at N1,431/$1 on Friday, with the referenced NAFEX rate at N1,382/$1.
At an estimated 1,500 BDC licenses remaining, over $15 million might have been sold into the retail end of the market. Before the revocation Nigeria had an estimated 5,689 licenses.
The resumption of forex sales to BDCs indicates that the apex bank is refocusing on enhancing liquidity in the retail segment of the forex market.
Previously, price arbitrage was a significant reason for the prohibition of forex sales to operators during Emefiele’s tenure, a time when the exchange rate was fixed.
However, with the exchange rate now being “market-determined” under a new forex regime, the apex bank believes that operators no longer have the incentive to engage in arbitrage by purchasing at lower rates from the CBN and selling at higher rates in the parallel market.
By enhancing liquidity, the central bank aims to stabilise the forex market, narrow the gap between official and parallel market rates, and ultimately reduce the volatility of exchange rates.
