Nigeria’s Central Bank will begin selling dollars to eligible Bureau De Change operators (BDCs) at N1,301 per dollar in its latest effort to improve liquidity in the FX market, three years after Godwin Emefiele first banned the sale of the greenback to those operators.
The apex bank will begin those sales after proposing more stringent rules for BDC operators last week, according to a circular published on Tuesday. The CBN hopes that this move will take the pressure off the banks and help meet the demand in the retail market.
“What we’re hoping to accomplish by this, frankly, is to bring some sanity to an industry that arguably no longer serves the interests of those whom it was meant to protect,” CBN governor Olayemi Cardoso said at the end of the rate-setting meeting on Tuesday. The apex bank raised the benchmark lending rate to 22.75% in the most aggressive push to contain inflation.
BDCs will only be permitted to sell to end-users at a margin not exceeding 1% above the purchase rate from CBN, according to the new directive. [ad]
Analysts have said the CBN aims to eliminate street trading and standardize the operations of BDC operators with technology so their volumes and activities can be monitored in real time. Under ousted CBN Governor Godwin Emefiele, the CBN banned sales of FX to BDC operators in 2021. The apex bank reversed the two-year ban in August 2023.
Last week, the bank increased the minimum capital requirements for BDC operators to N2 billion for Tier 1 license holders and N500 million for Tier 2 licence.
“We hope we’ll be able to increase competition from those who are genuine,” Cardoso said.
CBN’s efforts to unify the naira have failed to hit home due to the bank’s inability to meet demand. As a result, the parallel market continued to be the viable source of supply, opening up a significant arbitrage opportunity. The prevailing thinking on the government’s side is that speculators are taking advantage of the situation to inflate prices artificially.
Still, many experts disagree, pointing out an absence of liquidity as the real cause of the problems.
TechCabal reported on Monday that the fear of being arrested by officials of Nigeria’s anti-graft agency, the Economic and Financial Crimes Commission (EFCC) has driven currency traders away from street trading. Last week, Nigerian authorities blocked access to crypto companies’ websites and pegged rates on Binance, a global crypto exchange.
