The Central Bank of Nigeria (CBN) has once again issued a circular to all Bureau De Change (BDC) operators. This announcement details a new initiative to directly sell US dollars to them at a reduced rate of N1,021 per dollar.
This initiative represents the second such occurrence this month and the fourth instance this year, underlining the CBN’s proactive strategy in managing currency volatility and ensuring the availability of essential foreign exchange.
In February 2024, the CBN initially distributed $20,000 to each BDC, charging a rate of N1,301 per dollar. Subsequent adjustments were made during the second disbursement when the bank halved the allocation and lowered the rate to N1,251 per dollar.
More recently, at the beginning of this month, the apex bank made another sale, offering $10,000 to each BDC at a rate of N1,101 per dollar.
BDCs to sell at N1,036/1$
Aimed at addressing the retail-end market, particularly for invisible transactions such as travel allowances, tuition fees, and medical payments, this policy involves selling a total of $10,000 to each eligible BDC.
These BDCs are then required to sell to end users with a maximum markup of 1.5% over the buying price.
This stipulation is intended to prevent price gouging and ensure that the benefits of the discounted rate are transferred to consumers needing foreign exchange for various personal transactions.
The circular read:
- “We write to inform you of the sale of $10,000 by the Central Bank of Nigeria (CBN) to BDCs at the rate of N1,021/$1. The BDCs are in turn to sell to eligible end users at a spread of NOT MORE THAN 1.5 percent above the purchase price.
- “ALL eligible BDCs are therefore directed to commence payment of the Naira deposit to the underlisted CBN Naira Deposit Account Numbers from today, Monday April 22, 2024, and submit confirmation of payment, with other necessary documentations, for disbursement of FX at the respective CBN Branches.”
According to the circular seen by Nairametrics, $10,000 will be sold to 1,583 BDC operators which indicates about $15.83 million injected into the retail end of the market.
Naira losing steam in official, black markets
Naira, which has been described as a best performing currency, is losing its steam in the official and black markets.
- The exchange rate between the Naira and Dollar on the official NAFEM window fell to a week-to-date low of N1,234.49/$1 on Monday, 22nd of April 2024.
- This is a sharp depreciation from the official exchange rate N1,169.99/$1 recorded on Friday 19th of April 2024, which was also a 6-day low.
- Also, the naira remained above the N1200/$ band in the unofficial market, causing the Nigerian currency to pause its winning streak against the American dollar on a weekly spectrum.
- The naira’s surge since late March, which had made it the best-performing currency in the world, came to a stop on Sunday when it had its first weekly decline in several weeks on the parallel market.
- The break in the naira’s rapid rally coincided with a strengthening of the US dollar.
What you should know
In an earlier circular, CBN had provided a list of 1588 eligible BDCs. If all the eligible BDCs paid for the dollar allocation from the CBN, it would likely cost the apex bank about $15.88 million.
Yemi Cardoso, CBN governor, recently stated that interventions in the BDC segment are minimal and targeted to ensure its effective integration into the broader market.
He said:
- “I can understand that, especially at the outset, there have been little cases fot the bureau de change (BDC). There was a need to get that segment going. And small amount of money relatively has gone into that to catalyse that. And it is important not to keep them out of the mainstream. But in terms of intervention, that it is really not our attention at all.”
This comment came amid concerns around the depleting foreign exchange reserves, which dipped by $2.33 billion in 31 days.
