CBN orders BDCs to sell Dollar at ₦1,269 amid Naira depreciation concerns

CBN orders BDCs to sell Dollar at ₦1,269 amid Naira depreciation concerns

In a bid to stabilise Nigeria’s foreign exchange market and curb the depreciation of the Naira, the Central Bank of Nigeria (CBN) has issued stringent directives to bureau de Change (BDC) operators, mandating them to adhere to a fixed exchange rate.

The directive, communicated through a memo dated March 25, 2024, from Dr. Hassan Mahmud, Director of the bank’s Trade and Exchange Department, stipulates that each approved BDC operator is entitled to purchase a maximum of $10,000 at the rate of ₦1,251/$1. According to Mahmud, BDCs are required to sell to eligible end-users at a spread not exceeding 1.5% above the purchase price, effectively capping the maximum selling price at ₦1,269/$1.

Mahmud cautioned that any BDC found violating these terms would face appropriate sanctions, including potential suspension from further participation in the forex market.

The move comes amid ongoing efforts by the CBN to enact reforms aimed at stabilising the forex market and addressing concerns over the depreciation of the naira, which recently traded at nearly ₦2,000/$1. BDC operators have long been under scrutiny for their role in exacerbating currency instability, prompting the CBN to take decisive action to regulate their operations.

Earlier this month, the CBN took decisive action by revoking the licenses of 4,173 BDC operators for non-compliance with regulatory provisions. These provisions include the timely payment of fees, adherence to reporting guidelines, and compliance with CBN directives, particularly those relating to Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and Counter-Proliferation Financing (CPF) regulations.

This latest directive marks the second consecutive month in which the CBN has imposed a fixed market rate on BDC transactions. In February, the bank allocated $20,000 to each BDC operator at the rate of ₦1,301/$1, with instructions to sell to customers at no more than 1% above the purchase price.

The CBN’s proactive measures underscore its commitment to stabilising the forex market and safeguarding the value of the Naira against external pressures. By enforcing strict regulations on BDC operations and implementing fixed exchange rates, the bank aims to restore confidence in the currency and mitigate the adverse effects of exchange rate volatility on the Nigerian economy.

While these measures may face resistance from some quarters, they represent a necessary step towards achieving monetary stability and fostering sustainable economic growth.