By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) announced on Thursday that it will allow eligible Bureau De Change Operators (BDCs) to purchase foreign exchange (FX) in an effort to meet the increasing demand from businesses.
According to a circular signed by A.A Mahdi, the Acting Director of Trade and Exchange at the CBN, each BDC will be able to buy $20,000 at a rate of N1,450/$1.
The CBN noted that there are ongoing distortions in the retail market, which are spilling over into the parallel market and widening the exchange rate gap, despite recent reforms. The circular stated, “To this end, the CBN has approved the sales of FX to eligible BDCs to meet the demand for invisible transactions. The sum of $20,000 is to be sold to BDCs at N1,450/$1, representing the lower band of the trading rate at NAFEM on the previous day. All BDCs are allowed to sell to eligible end users at a margin not more than 1.5 per cent above the purchase rate from the CBN.”
BDCs are instructed to make Naira payments to specified CBN account numbers and submit confirmation of payment along with other necessary documents for disbursement at CBN branches in Abuja, Akwa, Kano, and Lagos.
This move comes as the Naira faces significant pressure, approaching N1,600/$1. Additionally, the pound sterling has risen to N2056/£1 from N2035/£1, causing concern among economic analysts who attribute the local currency’s decline to recent inflation figures.
To combat rising inflation, the CBN has increased interest rates three times this year. Governor Olayemi Cardoso recently stated that the bank does not plan to halt these rate hikes. In the foreword of the CBN’s inaugural Macroeconomic Outlook for Nigeria, Cardoso warned that persistent inflation could necessitate prolonged monetary tightening, affecting the nation’s growth potential.
Cardoso also highlighted several risks to Nigeria’s positive domestic outlook, including security challenges, supply-side shocks, and global geoeconomic fragmentation, which could exacerbate inflationary pressures. These factors, along with structural imbalances, may require extended monetary tightening, thereby suppressing growth potential.
He stated, “The positive domestic outlook is, however, subject to certain risks, especially as security challenges, supply-side shocks, and global geoeconomic fragmentation could aggravate inflationary pressures. Elevated inflation, due to long-standing structural imbalances, could extend monetary tightening and depress growth potentials.”