Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
No Result
View All Result
Nairametrics
No Result
View All Result
Home Markets Currencies

Official: CBN Bans Sale Of Forex To BDCs, Here Is What It Means

NairametricsbyNairametrics
7 years ago
in Currencies, Spotlight
Share on FacebookShare on TwitterShare on Linkedin

The Central Bank of Nigeria called a press conference on Monday announcing that it will be stopping the sale of forex to Bureaux De Change (BDC) operators. It also announced that it has now permitted banks to receive forex deposits. This comes two days after it said it was exploring options for its next move and after it disclosed that it will be supporting Dangote Refineries and other Nigerians it believed to be creating value locally

Here is a summary of the announcement.

a) The Bank would henceforth discontinue its sales of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws;

b)The Bank would now permit commercial banks in the country begin accepting cash deposits of foreign exchange from their customers.

Why the CBN took this decision

Depletion of dollar reserves –  The CBN explained that the drop in oil prices was depleting its dollar reserves which it said had dropped from $37.3 billion in June 2014 to $28 billion “as of today”. The CBN further explained that Nigeria’s import bill was now N917.6 billion a month compared to N148.3 billion a month back in 2005 (when oil sold for $50).

Dubious BDC Dealers – The CBN in taking this decisions complained of the activities of the BDC operators whom it claimed have gone from retail dealers of forex to wholesale dealers. It complained that instead of catering for retail users who needed about $5,000 they now transact in millions of dollars suggesting that the BDC source money from unscrupulous places. The CBN also noted that the BDC’s buy dollars from the CBN at N197 only to sell to their customers at N250. According to the CBN it’s no wonder that BDC have risen “from a mere 74 in 2005 to 2,786 BDCs today. In addition, the CBN receives close to 150 new applications for BDC licenses every month.”

This latest CBN statement perhaps confirms that the fears of some of its biggest critics that it is losing the battle to save the Nigeria. Sending the BDC’s out of the official window is likely an admission that its demand management policies is not doing enough to stifle “irresponsible demand” for forex in the economy. Analysts also predict that this may just be the first move in officially floating the currency albeit in the inter-bank market. Some BDC operators interviewed opined that there might be a spike in the price of the dollar in the parallel market at least in the short-term due to the shock this latest decision will cause.

Typically, parallel market rates usually drop when the CBN sells dollars to the BDCs confirming that some of this dollars do find its way to the black market. Now that the CBN is no longer a supplier of dollars, the $167 million per week it officially sells to BDCs will now leave a huge hole in a market that is already starved of cash.

 

Related

Tags: 41 banned listCapital controlsCBN Forex PolicyForex PolicyForex Window

Leave a Reply Cancel reply

HFM
Mega Millions
Mega Millions
Patricia





NM newsletters

Business News | Stock Market | Money Market | Cryptos | Financial Literacy | SME |

Recent News

  • NGX closes positive as investors gain N142 billion
  • MTN Nigeria Plc reports 22.3% increase in pre-tax profits for full year 2022
  • 5 tips to get accurate answers from ChatGPT

Follow us on social media:

Recent News

NGX closes positive as investors gain N142 billion

NGX closes positive as investors gain N142 billion

February 1, 2023
MTN Nigeria Plc reports 22.3% increase in pre-tax profits for full year 2022

MTN Nigeria Plc reports 22.3% increase in pre-tax profits for full year 2022

February 1, 2023
  • Home
  • Exclusives
  • Markets
  • Industries
  • Economy
  • Business News
  • Financial Literacy
  • Lifestyle
  • Opinions

© 2023 Nairametrics

No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds

© 2023 Nairametrics