The Central Bank of Nigeria (CBN) sold dollars to the Bureau De Change (BDC) Operators for N1,251, which resulted in the naira strengthening on Monday throughout the foreign currency (FX) markets.
In February 2024, the CBN committed to selling BDCs for $20,000 every week at N1,301.
The central bank instructed the BDCs to sell to qualified clients at a rate not to exceed 1.5% above the purchase price, according to a CBN circular.
As the dollar was quoted at N1,408.04 on Monday, greater than N1,431.49 posted on Friday at the Nigerian Autonomous Foreign Exchange Market (NFEM), the naira appreciated by 1.64 percent, according to the currency auction report.
The intraday high finished at N1,442 per dollar on Monday, according to data from the FMDQ, which was higher than the N1,468/$1 close on Friday. On Monday, the intraday low closed at N1,300 per dollar, while on Friday it finished at NAFEM at N1,301.
From $199.71 million on Friday to $221.80 million on Monday, the daily FX market turnover grew by 11.06 percent.
The CBN circular states, “We refer to our letter to you regarding the above subject, wherein the CB approved a second tranche of FX sale to eligible BDCs, referenced TED/DIR/CON/GOM/001/071.”
“We are writing to let you know that $10,000 has been sold to each BDC at a rate of N1,251/$1. The BDCs are required to charge a margin of no more than 1.5% over the purchase price when selling to qualified end users.”
On Monday, the dollar fell to N1,450, which increased the value of the naira by 2.07 percent as traders dumped their hoarded foreign currency on the illegal market, often known as the parallel market.
The naira strengthened to N1,450 on Monday after closing at N1,480 on Friday, which caused many speculators who had purchased dollars at higher rates to lose money.
The CBN formally established the $20,000 USD auction for each BDC in February 2024.
This came after ongoing changes to the foreign exchange market that were meant to bring the Naira’s exchange rate closer to what the market would decide.
The CBN voiced worry over persistent price distortions in the retail market, which are contributing to the expanding exchange rate differences in the parallel market, in a circular that was released on February 27, 2024, and signed by Hassan Mahmud, Director of the Trade and Exchange Department.
To meet the demand for invisible transactions, the CBN responded by announcing that foreign exchange sales to qualified Bureau De Change would be approved. As of February 27, 2024, each BDC is allowed to purchase $20,000 at a rate of N1,301/$, which is equivalent to the lower band rate of spot transactions completed at NAFEM on the previous trading day.
All qualified BDCs received instructions to deposit Naira into certain CBN foreign currency deposit Naira accounts, and to submit payment confirmation and supporting documents at designated CBN branches in Lagos, Kano, Awka, and Abuja in order to receive payment.
This action is in contrast to the CBN’s July 27, 2021, decision to stop selling foreign exchange to BDCs, which was made under the direction of previous governor Godwin Emefiele.
Emefiele cited BDCs for violating their licenses and Nigeria’s FX regulations by participating in wholesale FX trading in excess of USD 5000. He attacked BDCs for straying from their original intent and helping to spread corruption across the nation.
