Nigeria’s central bank has issued a circular authorizing dealers instructing them to sell forex to end users at N386/$1.
In a circular titled, “Weekly Exchange Rate for Disbursement of Proceeds of International Money Transfer Service Operations” the Apex bank detailed the applicable exchange rate of proceeds of IMTOs for the period, August 31, 2020.
The Circular from the CBN states,
‘’Please be advised that the applicable exchange rate for the disbursement of proceeds of IMTOs for the period Monday, August 31 to Friday, September 4, 2020, is as follows:
- IMTSOs to banks – N382/$1
- Banks to CBN — N383/$1
- CBN to BDCs — N384/$1
- BDCs to end-users – Not more than N386/$1
- Volume of sale for each market is $10,000 per BDC
The resumption of sales to BDCs is coming ahead of the reopening of the country’s airports to international flight operations and after almost 3 weeks of the adjustment of the official exchange rate by the CBN.
What this means: This circular follows a CBN announcement that forex sales to BDC segments will commence from August 31st and will be sold on Monday and Wednesdays. 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.
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.
