The Central Bank of Nigeria (CBN) has taken a significant step to address the ongoing distortions in the retail foreign exchange market, which has led to a widening exchange rate premium in the parallel market.
As part of its ongoing reforms aimed at achieving a market-determined exchange rate for the Naira, the CBN has approved the sale of foreign exchange (Forex) to eligible Bureau De Change (BDCs) to meet the demand for invisible transactions.
According to a statement signed by A. Mahdi, Acting Director, Trade & Exchange Department, the CBN will sell $20,000 to each eligible BDC at a rate of N1450/$, which represents the lower band of the trading rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) in the previous trading day.
This move is designed to increase access to foreign exchange for legitimate transactions and reduce the pressure on the parallel market.
The CBN has set guidelines for the sale of Forex to BDCs, requiring them to make Naira payments to listed CBN Naira deposit account numbers and submit confirmation of payment with other necessary documentation for disbursement at designated CBN branches in Abuja, Awka, Kano, and Lagos.
This process aims to ensure transparency and accountability in the distribution of Forex to BDCs.
To ensure that the benefits of this initiative are passed on to end-users, the CBN has directed all BDCs to sell to eligible end-users at a margin not exceeding 1.5% above the purchase rate from the CBN.
This measure is intended to prevent excessive profiteering by BDCs and ensure that the gains of this initiative are shared by all stakeholders.
The CBN’s decision to sell Forex to BDCs is a significant step towards addressing the challenges in the retail foreign exchange market.
By increasing access to foreign exchange for legitimate transactions, the CBN aims to reduce the pressure on the parallel market and achieve a more market-determined exchange rate for the Naira.
The move is also expected to boost confidence in the foreign exchange market and encourage more participants to engage in legitimate transactions.
By ensuring that Forex is available to eligible end-users at a reasonable margin, the CBN is promoting transparency, accountability, and fair play in the market.
Overall, the CBN’s initiative is a positive development in the ongoing efforts to reform the foreign exchange market in Nigeria.
By addressing the distortions in the retail market and promoting transparency and accountability, the CBN is taking a significant step towards achieving a more market-determined exchange rate for the Naira.
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