The Central Bank of Nigeria has issued a circular to Bureau De Change operators, notifying them of the sale of $10,000 to each BDC at a rate of N1,251 per US dollar.
According to the circular, BDCs are instructed to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price, implying that BDCs are not expected to sell above N1,269 per US dollar.
The CBN stated, “We write to inform you of the sale of $10,000 to each BDC at the rate of N1,251/$1. The BDCs are to sell to eligible end users at a spread of NOT MORE THAN 1.5 per cent above the purchase price.”
This marks the resumption of dollar sales to BDC operators after a prolonged suspension by the central bank in 2021. The ban was lifted earlier in the year following the revocation of licenses of over 4,173 BDC operators in February.
The exchange rate in the parallel market fell below N1,400 per US dollar after closing at N1,431/$1 on Friday, with the referenced NAFEX rate at N1,382/$1.
The resumption of forex sales to BDCs indicates that the apex bank is refocusing on enhancing liquidity in the retail segment of the forex market. Previously, price arbitrage was a significant reason for the prohibition of forex sales to operators during Emefiele’s tenure, a time when the exchange rate was fixed.
However, with the exchange rate now being “market-determined” under a new forex regime, the apex bank believes that operators no longer have the incentive to engage in arbitrage by purchasing at lower rates from the CBN and selling at higher rates in the parallel market.
By enhancing liquidity, the central bank aims to stabilize the forex market, narrow the gap between official and parallel market rates, and ultimately reduce the volatility of exchange rates. This strategy is expected to make forex more accessible to retail and small-scale enterprises, fostering a more transparent and efficient market.
