The Central Bank of Nigeria (CBN) is taking proactive measures to rectify distortions in the country's foreign exchange market, particularly in the retail segment. In a recent circular by Dr. Hassan Mahmud, the Director of the Trade & Exchange Department, the CBN announced its decision to allocate $20,000 to each eligible Bureau De Change (BDC) operator across Nigeria. This move, aimed at achieving a market-driven exchange rate for the Naira, involves selling the allocated funds at a rate of N1,301/$ – reflecting the lower band rate of spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as of the previous trading day. The initiative is expected to inject liquidity into the market and stabilize the Naira.
The circular also outlines guidelines for BDC operators, restricting them from selling foreign exchange to end-users at a margin exceeding one percent above their purchase rate from the CBN. This measure seeks to prevent excessive mark-ups and protect consumers from exploitation. Eligible BDCs are required to deposit their Naira payments into designated CBN Foreign Currency Deposit Naira Accounts and provide confirmation of payment and other necessary documentation.
This strategic intervention aims to enhance the efficiency of the foreign exchange market, promoting transparency and equity. As the CBN continues efforts to address the foreign exchange crisis, attention is also turning towards rising inflation rates. With the first Monetary Policy Committee (MPC) meeting of the year concluding, expectations are high for new monetary policy decisions to tackle inflation. The CBN has previously implemented significant reforms to address Naira depreciation, including clearing FX backlog, limiting forex for foreign education and medical tourism, increasing BDCs' minimum share capital, and curbing FX speculation
Source: Nairametrics
