“Dollar is Falling”: New Exchange Rate Declared as CBN Begins Another Round of Sales to BDCs

“Dollar is Falling”: New Exchange Rate Declared as CBN Begins Another Round of Sales to BDCs

  • The naira to dollar gained further after closing last week at N1,150 to the dollar on the parallel market
  • It also appreciated to gain 7.16%, or N88.23, in the official foreign exchange (FX) trading platform
  • This occurred after the BDC operators bought the dollar at a rate of N1,101/$ from the apex bank

On Friday, April 12, the value of the naira increased to N1,150 per dollar on the parallel market for foreign exchange (FX).

BDCs declare new exchange rate for naira to dollar
The naira appreciated by 0.86 on Friday, April 12, 2024. Photo Credit: BDC, Liubomyr Vorona
Source: Getty Images

The purchase rate of the US dollar was quoted by currency dealers, often referred to as Bureau de Change (BDC) operators, at N1,110, and the selling price at N1,150, yielding a profit margin of N40.

From the N1,160 registered on April 11, the naira appreciated by 0.86 on Friday, April 12, 2024.

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The official foreign exchange (FX) trading platform in Nigeria, FMDQ Exchange, reported that on Friday, the value of the naira increased by 7.16%, or N88.23, to N1,142.38/$, from N1,230.61/$ on Monday.

CBN commits more to BDC

The appreciation of the local currency is at the back of the apex bank's recent action to guarantee a greater dollar supply.

A few days after the CBN opened the third tranche of sales to BDC activities, the naira continued to appreciate more in value.

It could be recalled that on April 8, the apex bank started selling foreign exchange to BDC operators at N1,101/$.

Additionally, the CBN ordered all banks to cease using foreign currency as collateral for naira loans on the same day.

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“The dollar is falling and it is not my fault. It is how the FX market is now,” Lawal, a BDC operator told TheCable.

Earlier, the Punch reported that a BDC operator at Wuse Zone 4, Ibrahim Yahu, associated the demand for dollars with the new rate determined after the CBN commenced the second sale round to the traders.

He said:

“The CBN initially started selling to us at N1,251, but they gave another rate last Thursday at N1,190, which is the reason for the new fresh drop of the dollar. The CBN selling directly to us has really helped trading activities.”

Weighing on the development, Samuel Oyekanmi, a research and insight associate with Norrenberger Financial Group, opined that one should commend the CBN for its series of policies that have supported the naira's strength against other currencies in the last month.

He added:

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"However, it comes at cost as the CBN has resumed the intervention in the FX market, which had limited the growth of the external reserves in time past.
"My sense is that the CBN hopes that the sanitation it had embarked on since February in the FX market will close all loopholes and lead to an ideal price discovery in the value of the naira.
"I reckon the naira may settle in the region of N1,000 to N1,100 as the CBN continue to drive the strengthening of the naira both through the BDC and the official FX market system."

Naira becomes world's best-performing currency

Legit.ng also reported that following a three-day holiday break, one dollar sold for N1,125 on the streets on Friday, April 12, 2024, indicating a moderating decline in demand.

Many dealers said that trading volumes were inconsistent during the holidays, but the currency remained unchanged from the N1,120 it ended at on Thursday, April 11.

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Naira becomes world’s best-performing currency, continues gain after 3 days to near N1,000/$1

Because banks were closed for the holiday, transactions happened occasionally, which caused the market rates to vary.

Source: Legit.ng

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