Global Investment Trends Monitor, Foreign Direct Investment

The Central Bank of Nigeria (CBN) has increased its foreign exchange injections for Bureau De change (BDCs). The apex bank disclosed this in a circular released this evening.

According to the notice,

In addition to the existing market days of Monday, Wednesday and Friday, the CBN has introduced a special intervention day every Thursday for $15,000 per BDC commencing on Thursday, December 6, 2018.

The move, the apex bank disclosed was due to the approaching yuletide season and resultant increase in demand for foreign exchange for Personal/Business Travel Allowance.

The CBN also warned operators to ensure strict compliance with provisions pertaining to foreign exchange transactions. Any infraction, it stated, would be met with appropriate sanctions.

The Naira had earlier today hit a one year low of N370 to the dollarĀ  at the parallel (unofficial) market.

Other triggers

The decline in the parallel market rate may also be connected to the fall in global crude oil prices. Oil prices, today fell below the $50 mark for the first time in a year,after hitting a $76 high in August.

Implication of the intervention

While the move may help stem demand at the parallel market, this could result in more pressure on the country’s foreign exchange reserves. The country currently has 2991 BDC’s. Assuming a 1000 of these BDC’s were to apply weekly, this would amount to an extra $15,000,000 defending the exchange rate.

Data from the CBN website, show the country’s gross foreign reserves stood at $41 billion as at yesterday.

CBN Governor Godwin Emefiele had few weeks ago warned speculators not to bet against a devaluation of the country’s exchange rate, against the US dollar.

Coronation Research

 

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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