CBN sells $20,000 to BDCs amid FX distortions

The apex bank disclosed this on Thursday, July 18, in a circular signed by its acting Director of Trade and Exchange A. A. Mahdi.

It said the $20,000 to be sold to each BDC operator would come at the rate of N1,450 to a dollar to meet the demand for invisible transactions.

“Following the on-going reforms in the foreign exchange market, with the objective of achieving an appropriate market determined exchange rate for the naira, the CBN has observed the continued distortions in the retail end of the market,” apex bank stated.

According to the bankers’ bank, the distortion was feeding into the parallel market and further widening the exchange rate premium.

“To this end, the CBN has approved the sales of FX to eligible  BDCs to meet the demand for invisible transactions.

“The sum of $20,000 is to be sold to each BDC at the rate of N1,450/$ (representing the lower band of the trading rate of NAFEM in the previous trading day),” CBN said.

It added that all the BDCs were permitted to sell to eligible end users at a margin not more than 1.5 per cent above the purchase rate from CBN.

The recent CBN intervention at the Nigerian FX market comes at a time when the naira is facing constant pressure, depreciating towards N1,600 to the dollar. Earlier this year, the naira had peaked at N1,900 to the dollar.

On Wednesday, July 17, the naira depreciated against the dollar at N1,565/$ at the parallel market from N1,550 on the previous day.

At the official Nigerian Autonomous Foreign Exchange Market (NAFEM), it also depreciated to N1,581.65 from N1,576.66 the previous day.

The CBN had resumed the sales of dollars to the BDCs to stabilise the currency market, after lifting its ban on the operators.

In March, the apex bank sold $10,000 to each of the eligible BDC operators at the rate of N1,251/$1, and also at the rate of  N1,021/$ to BDCs in April.

A check by The ICIR shows a list of 5,691 BDC operators on CBN website, but the apex bank had in March revoked the operating licences of 4,173 BDCs over their failure to meet regulatory guidelines.

https://www.icirnigeria.org/cbn-sells-20000-to-bdcs-amid-fx-distortions/