N1,269/$1: CBN Sells Dollar to BDC Operators at ‘Cheap’ Rate, Fixes New Resale Exchange Rate
- The Central Bank of Nigeria has once again sold dollars to licensed Bureau De Change Operators in the country
- The latest sale is part of the apex bank's efforts to ensure there is enough liquidity in the market
- The CBN has also fixed an exchange rate limit for the BDCs when selling to Nigerians seeking dollars
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Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central Bank of Nigeria has again made another bold move to achieve a stronger naira in the foreign exchange market.
In a circular released on March 25, 2024, the apex bank pegged a new round of $10,000 forex sales to licenced Bureau De Change (BDC) operators at N1,251/$1.
Source: Getty Images
The naira at N1,251/$1 is cheaper when compared with the official exchange rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, which closed at N1408.04 on Monday, March 26.
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CBN gives a resale rate
To achieve its objective and avoid round-tripping, the CBN has instructed the beneficiary BDCs to sell the allocated dollars to eligible customers at a rate not exceeding 1.5% above the purchase price.
This indicates that BDCs are expected to sell at a maximum of N1,269/$1.
The set exchange rate represents a reduction of 3.4% compared to the maximum of N1,314.01/$ set in the last round of sales to BDC operators.
CBN message to BDC operators
In a letter addressed to the president of the Association of Bureau De Change Operators of Nigeria (ABCON), Hassan Mahmud, the director of the trade and exchange department at the CBN, explained the rationale behind the adjustments is to stop the continued price distortions at the retail end of the market.
The circular reads:
“We refer to our letter to you referenced TED/DIR/CON/GOM/001/071 in respect of the above subject wherein the CBN approved a second tranche of sale of FX to eligible BDCs.
"We are writing to notify you about the sale of $10,000 to each BDC at the rate of N1,251/51. BDCs are required to sell to eligible end users with a margin not exceeding 1.5% above the purchase price.
"All eligible BDCs are instructed to make the Naira payment to the listed CBN Naira Deposit Account Numbers by the close of business on Thursday, March 28, 2024. Confirmation of payment, along with other necessary documentation, must be submitted for disbursement at the relevant CBN Branches."
Expert speaks
Reacting to the development in a chat with Legit.ng, Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE) praised the CBN's decision to sell dollars to BDCs.
He, however, noted that the CBN must ensure strict compliance with all its rules.
"Yes, it is good for the economy that the CBN intervenes in the forex market. Every central bank in the world will always be a player in the forex market to protect its currency value. The CBN's sale of forex to BDCs is a welcome development.
"The only challenge is ensuring that all beneficiaries adhere to the guidelines. This will help go a long way to stabilize the market."
UK firms predict exciting exchange rate
Earlier, Legit.ng reported that two UK-based financial institutions have predicted a new exchange rate for the naira against the dollar.
Goldman Sachs and Standard Chartered believe the naira will rebound and close stronger in 2024.
Their predictions are based on the current reforms by the Cardoso-led CBN, which has helped the naira achieve an N1572.86/$ rate on Monday from above N1,600.
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Source: Legit.ng
