Amidst Nigeria's evolving economic landscape, the Central Bank of Nigeria (CBN) has taken significant steps to bolster liquidity in the foreign exchange market, signaling a potential shift in the nation's currency dynamics.
In a recent circular addressed to Bureau De Change operators (BDCs), the CBN announced the sale of $10,000 to each BDC at a fixed rate of N1,251 per US dollar. This move revealed in a circular obtained by Nairametrics, marks a resumption of dollar sales to BDCs after a prolonged ban imposed by the central bank in 2021.
The circular stipulates that BDCs are expected to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price, effectively capping the maximum selling rate at N1,269/$1.
The decision to resume dollar sales to BDCs follows the revocation of licenses of over 4,173 BDC operators earlier in the year, signaling a strategic shift in the CBN's approach to managing forex liquidity.
Analysts suggest that the resumption of forex sales to BDCs reflects the CBN's commitment to enhancing liquidity in the retail segment of the forex market. This move is expected to mitigate price arbitrage, a significant concern that led to the prohibition of forex sales to operators during previous regimes.
With the exchange rate now determined by market forces, the CBN aims to minimize arbitrage opportunities and stabilize the forex market. By narrowing the gap between official and parallel market rates, the central bank aims to foster a more transparent and efficient forex market, thereby making forex more accessible to retail and small-scale enterprises.
Nairametrics projects that sustained efforts to enhance liquidity could contribute to a stronger Naira in the short term, especially with expectations of a hike in the Monetary Policy Rate (MPR) during the upcoming CBN meeting. This aligns with the central bank's broader objective of achieving exchange rate stability and reducing volatility in the forex market, ultimately supporting Nigeria's economic growth trajectory.
