The Central Bank of Nigeria (CBN) has mandated that all Bureau De Changes (BDCs) be allowed to sell foreign exchange to end users at a margin not to exceed one percent (1%) above their purchase rate from the CBN. This is a decisive step towards closing the gap between the official and unofficial exchange rate.
This occurs more than two years after Godwin Emefiele, the suspended former governor of the CBN, halted the selling of foreign currency to BDC operators in that particular forex market segment.
To this purpose, the CBN has decided to pay $20,000 to each eligible Bureau De Change (BDC) operator nationwide at a rate of N1,301/$ through a new circular issued by Dr. Hassan Mahmud, the Director of Trade & Exchange Department.
As part of larger measures to develop a market-driven exchange rate for the Naira and lessen the pressures feeding into the parallel market, the circular also lays out particular criteria for the BDC operators.
The price at which this allotment is sold, N1,301/$, is based on the lower band rate of spot transactions that were completed at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as of February 27, 2024, the preceding trading day.
The bank said that this plan should stabilize the value of the Naira and bring much-needed liquidity to the market.
Additionally, the goal of the legislation is to shield customers from price exploitation and stop exorbitant markups.
The Circular Says:
“To accommodate the demand for invisible transactions, the CBN has permitted the selling of foreign exchange to qualified Bureau De Change (BDCs). Each BDC is to purchase $20,000 at a rate of N1,301/$-, which is the lower band rate of completed spot transactions at NAFEM for the preceding trading day, which is today, February 27, 2024.
“Selling to end customers at a margin NOT MORE THAN one percent (1%) above the buy rate from CBN is permitted for all BDCs.
It further said that the CBN Foreign Currency Deposit Naira Accounts are where eligible BDCs must deposit their Naira payments. They also need to submit other required paperwork and proof of payment in order to make it easier for the relevant CBN branches in Lagos, Kano, Awka, and Abuja to distribute funds.
It is anticipated that the CBN’s calculated involvement will improve the foreign exchange market’s efficiency and offer a more level playing field for Naira trade.
In the meantime, the federal government last week, among other things, disabled the online platforms of Binance and other cryptocurrency companies to prevent further manipulation of the FX market and stop the illegal flow of funds in an attempt to stop the devaluation of the naira against the dollar.
In addition to Binance, other websites that were also restricted included Forextime, OctaFX, Crypto, FXTM, Coinbase, and Kraken.
The National Security Adviser’s office ordered law enforcement to take decisive action against foreign exchange market speculators earlier on Tuesday.
Additionally, the government declared its intention to raise $10 billion in order to increase foreign exchange market liquidity.
The Economic and Financial Crimes Commission (EFCC) searched and arrested a number of Bureau de Change (BDC) operators across the nation on Monday in an aggressive effort to combat currency racketeering.
The CBN has also unveiled a number of recommendations in the last week aimed at resolving the nation’s currency depreciation issue.
The CBN said last Wednesday that cash payments for personal and business travel allowances (PTA/BTA) would no longer be accepted in a circular sent to all banks.