Naira Gets Boost, CBN Resumes Dollar Sales to BDCs

Naira stabilizes as CBN resumes dollar supply...

Naira recovers from N1,640 to N1,572 after CBN's intervention.

The Central Bank of Nigeria (CBN) on Thursday, July 18, that it would resume selling dollars to Bureaux De Change (BDCs), effectively halting the naira's downward spiral, which had plummeted to N1,640 per dollar in the parallel market. This move marks the first dollar sale to BDCs since April.

According to a circular signed by A. A. Mahdi, Acting Director of the Trade and Exchange Department at the CBN, the apex bank will sell $20,000 to each BDC. The CBN has instructed BDCs to sell to end-users at a margin not exceeding N1,450 per dollar, effectively capping the selling rate at N1,475.75 per dollar for end-users.

The circular by the CBN stated: “Following the ongoing reforms in the foreign exchange market, with the objective of achieving an appropriate market-determined exchange rate for the Naira, the Central Bank of Nigeria (CBN) has observed the continued distortions in the retail end of the market, which 1s feeding into the Parallel market and further widen the exchange rate premium.

“To this end, the CBN has approved the sales of FX to eligible Bureau De Change (BDCs) to meet the demand for invisible transactions. The sum of $20,000 is to be sold to each BDC at the rate of N1,450/$ (representing the lower band of the trading rate at Nigeria Foreign Exchange Market, NAFEM in the previous trading day).

“All eligible BDCs are directed to make the Naira payment to the listed CBN Naira Deposit Account Numbers and submit confirmation of payment with other necessary documentation for disbursement at the appropriate CBN Branches (ABUJA, AWKA, KANO and LAGOS).”

The naira witnessed a rapid appreciation in value following the CBN's announcement, recovering from a low of N1,640 per dollar in the parallel market to N1,572 per dollar by the end of the day. This swift rebound indicates a significant gain for the national currency.

Although the naira's appreciation is a positive development, it still fell short of its previous closing value of N1,570 per dollar in the parallel market on Wednesday, July 17, representing a marginal depreciation of N2. Despite this, the CBN's intervention has helped to stabilize the currency and potentially arrest further decline.