The Central Bank of Nigeria has announced the resumption of sale of forex to Bureau De Change starting August 31, 2020.
This was revealed in a circular to all authorised dealers, BDCs, and general public titled Resumption of Sales to Bureau De Change operators and signed by CBN Director of Trade and Exchange Department, Dr. O.S Nnaji.
The apex bank revealed the decision to commence forex sales was on the back of the limited resumption of international travel in the country.
Resumption of international travel triggers sale
The Minister of Aviation Senator Hadi Sirika had earlier revealed during the week that flight operations will resume on August 29th, 2020. However, in a COVID-19 briefing by Director-General of the NCAA, Musa Shuaibu Nuhu, the date as now been moved and firmed up to September 5th, 2020.
- With travel data now confirmed, the central bank has now followed suit with a resumption of sale of forex for personal and business travel allowances as well as other forex related invisible transactions.
- According to the circular seen by Nairametrics, forex sales will occur on Mondays and Wednesdays in the first instance but expects accounts of BDCs to be funded with the naira equivalent on Tuesdays and Fridays.
- The central bank also revealed that banks will also continue to sell forex to fund travel-related invisible transactions such as school fees and medical tourism. The sale will be made over the counter with Ticket, Visa, and Passport as evidence to facilitate the sale.
The CBN stopped the sale of forex to BDC operators on March 27th as the country faced an imminent lockdown. Since then, the exchange rate at the black market has gone from N395/$1 on March 27, 2020, to N477/$1 as of August 27, 2020, exactly 5 months later.
What this means: This circular follows a CBN announcement that forex sales to BDC will be sold at N386/$1 starting August 31st, 2020. Nigerians who seek to travel only need to present their passport along with visa and ticket to banks and forex will be sold to them at the official rate of N386/$1.
Will parallel market rate strengthen? With almost 3, 000 BDCs a $10,000 injection per BDC will result in about $30 million in forex sales per day of sales.
- In addition to forex sale to BDC’s the CBN will also sell to authorized dealers such as banks and forex dealers like Travelex.
- Depending on the level of demand and supply the exchange rate could strengthen if there is a lot of supply but limited demand as travel activities gradually pickup.
- However, if speculators get the better of the day then some of the forex from the BDC’s could filter into the black market allowing dealers to roundtrip and make money via arbitrage.