Nigeria Cuts Forex Rates to BDCs

The Central Bank of Nigeria (CBN) announced a drastic cut in its forex sell rate to Bureaux De Change (BDCs) in the country, taking it to N360 per dollar from its earlier rate of N399 to the dollar. Furthermore, the central bank has also changed the rate at which end users can buy dollars. BDCs have now been instructed to cap the naira to 362 to a dollar.

This announcement by the CBN comes hot on the heels of its directive of just the previous day to Deposit Money Banks (DMBs) regarding the sale of foreign exchange that has come from the central bank. DMBs have been instructed to sell these dollars to retail end-users no higher than a rate of N360 in case the buyer needs them for certain categories of products such as medical treatment and education fees.

Isaac Okorafor, the Acting Director of Corporate Communications at CBN, clarified the bank’s position. He said that licensed BDCs would now be able to buy forex from the CBN at N360 per dollar and would not be able to sell it to retail customers higher than N362 per dollar.

Okorafor clarified that the purpose of the latest policy on forex sales was to ensure that interbank and BDC rates could meet with the eventual aim of bringing out transparency in market operations. Retail buyers in Nigeria, the end users, have had to face a lot of problems getting foreign exchange and they often have to resort to the black market at higher prices. The CBN spokesman also issued a warning to licensed BDCs to operate within these guidelines or else they would face consequences.

The CBN executive also told the newspersons that an amount of $100 million that had been offered to registered forex dealers as part of the interbank wholesale window and meant to be sold to genuine customers was entirely purchased during the auction. Okorafor went on to ask all stakeholders to play their part in ensuring that the forex market in Nigeria ran smoothly since this was essential to the overall strength of the country’s economy.

A study of the forex black market in Abuja indicates that the naira has appreciated, touching a rate of N380 to a dollar, in response to a reduction in demand for the foreign currency. This is a 1.3% difference in the previous day’s closing rate of N385 for a dollar. The measures were taken by the CBN to increase the dollar supply in the economy and put the brakes on the naira’s freefall in the black market. As a matter of fact, Nigeria’s central bank has injected a total of $2.45 billion into the forex market in 13 different lots starting from its policy announcement on this subject made on the 20th of February, 2017. $231 million was fed into the market the very next day and this was followed by $180 million on the 27th of February.

Other payments included $350 million on the 3rd of March, $367 million on the 6th of March, $100 million on the 7th of March, $170 million on the 9th of March, $190 million on the 14th of March, $150 million on the 15th of March, $100 million on the 16th of March, $143 million on the 20th of March, $100 million on the 23rd of March, and finally, $185 million on the 27th of March.

It remains to be seen whether banks and other financial institutions comply fully with the new regulations. There are indications that certain companies are not selling sufficient forex to customers stating reduced supply of dollars from the central bank.