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The Central Bank of Nigeria (CBN) has announced a significant measure to stabilize the Naira’s exchange rate by selling foreign exchange valued at $20,000 to qualifying Bureau De Change (BDC) operators nationwide. This decision is part of broader efforts to address distortions in the foreign exchange market and reduce the influence of the black market.
In a circular signed by Hassan Mahmud, the director of the trade and exchange department, the CBN outlined the objective of rectifying distortions in the retail segment of Nigeria’s foreign exchange market and closing the widening gap in the exchange rate.
The circular, titled “Sale of Foreign Exchange to Bureau de Change Operators to meet retail demand for eligible invisible transactions,” stated that the allocation would be sold at a rate of N1,301/$, reflecting the lower band rate of executed spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as of the previous trading day, dated February 27, 2024.
The CBN emphasized that this initiative is part of ongoing reforms aimed at achieving a market-determined exchange rate for the Naira. It authorized the sale of foreign exchange to eligible BDCs to meet the demand for invisible transactions. Each BDC is permitted to purchase $20,000 at the specified rate.
Furthermore, the circular instructed qualified BDCs to deposit Naira into designated CBN Foreign Currency Deposit Naira Accounts and provide proof of payment along with other required documentation. Eligible BDCs are directed to make the Naira payment to designated CBN Foreign Currency Deposit Naira Accounts and submit confirmation of payment, along with necessary documentation, for disbursement at designated CBN branches in Abuja, Awka, Lagos, and Kano.
Additionally, all BDCs are allowed to sell foreign exchange to end-users at a margin not exceeding one percent (1%) above the purchase rate from the CBN.
Overall, this initiative aims to improve the stability of the Naira’s exchange rate, reduce distortions in the retail segment of the foreign exchange market, and enhance transparency in currency transactions.
