The Central Bank of Nigeria (CBN) has taken a significant step to bolster the Nigerian currency, the Naira, by selling dollars to Bureau De Change (BDC) operators at a rate of N1,251/$1. This move comes as a welcome development following a period of suspension of such sales in 2021.
In a recent circular, the CBN informed BDCs of the sale of $10,000 to each operator at the specified exchange rate. BDCs are instructed to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price, amounting to N1,269/$1 at the upper limit.
The resumption of forex sales to BDCs signifies the CBN’s commitment to enhancing liquidity in the retail segment of the forex market. With approximately 1,500 BDC licenses remaining, it’s estimated that over $15 million has been injected into the retail end of the market through this initiative.
This move is part of the CBN’s broader strategy to stabilize the forex market, narrow the gap between official and parallel market rates, and reduce exchange rate volatility. By making forex more accessible to retail and small-scale enterprises, the CBN aims to foster a transparent and efficient market environment.
The decision to resume forex sales to BDCs reflects a shift in the central bank’s approach, moving away from a fixed exchange rate regime to a market-determined system. This change aims to discourage price arbitrage, which was a significant concern under the previous regime.
Market observers anticipate that the increased liquidity could lead to a stronger Naira in the short term, especially with expectations of a hike in the Monetary Policy Rate (MPR) during the next CBN Monetary Policy Committee (MPC) meeting.