CBN Approves Fourth Tranche of FX Sale to BDCs at N1,021/$

•Sale to end users not to exceed 1.5% above purchase price 

•Edun, Cardoso, stakeholders to chart course for currency’s resilience 

•Naira depreciates further, now N1,300/$ on official market, N1,270/$ on parallel market

James Emejo in Abuja and Nume Ekeghe in Lagos

The Central Bank of Nigeria (CBN) yesterday approved the sale of additional Foreign Exchange (FX) to eligible Bureau De Change (BDC) operators at N1,021 to the dollar – below the current market price. This was the fourth consecutive intervention since the apex bank resumed support for the segment under its current management.

However, yesterday, the naira at both the official and parallel markets continued to slide, despite the sale of the greenback to BDC operators.

At the Nigerian Autonomous Foreign Exchange Market (NAFEM) window yesterday, the naira closed at N1,300/$, which was a N65.51 decline compared to N1,234.49/$1 it closed on Monday. 

Similarly, on the parallel market it weakened to N1,270/$1, compared to the N1250/$1 it exchanged on Monday.

But the daily turnover saw an increase of 21.3 per cent, reaching $133.65 million yesterday, compared to the $110.17 million recorded on Monday. The highest spot rate observed yesterday stood at N1,317, with the lowest spot rate recorded at N1,000

Relatedly, Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, and Governor of Central Bank of Nigeria (CBN), Mr. Yemi Cardoso, would today lead discussions on strengthening the naira at a roundtable organised by the Abuja Chamber of Commerce and Industry (ACCI).

They would speak alongside Executive Chairman, Economic and Financial Crimes Commission (EFCC), Mr. Ola Olukoyede, among other private sector players.

However, the latest liquidity intervention to BDCs was conveyed in a circular dated April 22, 2024, addressed to President, Association of Bureau De Change Operators of Nigeria (ABCON), and signed by CBN Director, Trade and Exchange Department, Dr. Hassan Mahmud.

The apex bank explained that the FX allocation was aimed at helping the BDCs meet retail market demand for eligible invisible transactions, adding that $10,000 would be sold to each BDC at below the market rate.

The bank also mandated the BDCs to sell the dollars to eligible end users at a spread not exceeding 1.5 per cent above the purchase price.

The central bank also advised all BDCs to abide by the rules and conditions stipulated in earlier letters/operational guidelines on the interventions.

On April 8, the bank okayed the third set of liquidity support to BDCs at N1,101/$1, directing that sales to customers must not exceed 1.5 per cent above the purchase price.

On March 25, the central bank approved a second tranche of sale of FX to BDCs, slashing the volume to $10,000 for each BDC at the rate of N1,251/S, which was a N50 reduction compared to N1,301/S allocation in the initial tranche.

CBN’s support for the operators started on February 27, when it approved the sale of liquidity to eligible BDCs to meet their demand for invisible transactions, adding that the sum of $20,000 would be sold to each BDC at the rate of N1,301/S, which represented the lower band rate of executed spot transactions at NAFEM for the previous trading day, as of February 27, 2024.

The central bank explained that the intervention became necessary following the continued price distortions at the retail end of the market, feeding into the parallel market and further widening the exchange rate premium.

The move also complemented ongoing reforms in the foreign exchange market, aimed at achieving an appropriate market-determined exchange rate for the naira.

CBN, however, emphasised that BDCs were allowed to sell to end-users at a margin not more than one per cent above the purchase rate from the central bank.

Meanwhile, the discussions on strengthening the naira at a roundtable organised by ACCI, was coordinated by the National Policy Advocacy Centre (PAC) of the chamber. It would address sectorial issues impacting the value of the local currency and explore strategies to fortify its purchasing power domestically and on the international market.

President of ACCI, Chief Emeka Obegolu, said the stakeholders’ discussion also aimed to emphasise the need to bolster the naira against global currencies through a concerted focus on local production of goods and services, reducing over-dependency on crude oil, and curbing excessive importation.

A statement issued by ACCI Media/Strategy Officer, Olayemi John-Mensah, said, “The roundtable serves as a platform to rally stakeholders within the financial sector and the government to combat the challenges of devaluation and inflation.”

Director of the Policy Advocacy Centre, Mr.  Chidiebere Onwumere, said part of the objectives of the event was to craft a communique for government consideration and implementation, focusing on reviewing past reforms, enhancing the ease of doing business, and attracting more investments into the country.

Onwumere said key attendees would include representatives from the International Monetary Fund (IMF), prominent economists from Nigerian institutions, medical experts from India, the Nigerian Investment Promotion Council (NIPC), National Bureau of Statistics (NBS), financial experts, scholars, and other stakeholders from various sectors.

According to the statement, the roundtable followed last year’s successful economic policy discussion on foreign exchange unification and the impact of fuel subsidy removal on businesses, which garnered significant participation from government officials, experts, and the business community.