In a turn of events, the Central Bank of Nigeria (CBN) has decided to resume the sale of foreign exchange to Bureau De Change (BDC) operators, aiming to address the persisting distortions in the retail segment of the country’s foreign exchange market.
Forex Crisis Abates as CBN Resumes Sales to BDC Operators
After a three-year hiatus, the Central Bank of Nigeria (CBN) has reintroduced foreign exchange sales to Bureau De Change (BDC) operators, marking a significant shift in its policy towards addressing the ongoing forex crisis in the country.
According to Hassan Mahmud, Director of the Trade and Exchange Department at the CBN, each eligible BDC operator will now have access to foreign exchange worth $20,000, signaling a renewed effort by the apex bank to stabilize the forex market.
READ ALSO
- Forex Crisis Threatens Nigerian Manufacturing Sector- MAN
- Forex Crisis Threatens Operations of Nigerian Modular Refineries
- Naira Trades At 1,498/$ Officially, Hits N1,600 On Black Market As CBN Cracks Down On Forex Operators
CBN Releases Circular To Curb Forex Crisis
In a circular issued on Tuesday, the CBN outlined its decision, emphasizing the need to rectify the distortions in the retail forex market and bridge the widening gap in exchange rates.
Mahmud stated, “Following the ongoing reforms in the foreign exchange market… the CBN has observed the continued price distortions… which is feeding into the parallel market and further widening the exchange rate premium.”
The move comes amidst growing concerns over the depreciation of the naira and its adverse impact on the economy. The forex crisis, exacerbated by various factors including dwindling oil revenues and external pressures, has prompted the CBN to explore new strategies to stabilize the currency.
How Forex Sale Was Suspended by Emiefele
The decision to resume forex sales to BDC operators marks a departure from the stance taken by the former CBN governor, Godwin Emefiele, who suspended such sales in 2021, citing concerns over regulatory violations and market distortions.
Emefiele had accused BDC operators of engaging in activities contrary to their licenses, thereby facilitating corruption and undermining the country’s economic stability.
However, the latest move by the CBN reflects a recognition of the need to address the challenges facing the forex market, particularly in light of the widening gap between official and parallel exchange rates.
The allocation of foreign exchange to BDC operators at a rate of N1,301/$ is expected to provide a much-needed boost to liquidity in the retail segment, thereby curbing speculation and stabilizing the exchange rate.
Despite these efforts, concerns remain about the sustainability of the CBN’s forex policies and their long-term impact on the economy. Analysts warn that while the resumption of forex sales to BDC operators may offer temporary relief, more comprehensive reforms are needed to address the underlying structural issues affecting Nigeria’s forex market.
In addition to the resumption of forex sales, the CBN has implemented a series of measures aimed at addressing the forex crisis, including the probing and clearing of FX backlog, restrictions on forex for foreign education and medical tourism, and the increase in BDCs’ minimum share capital. These initiatives underscore the CBN’s commitment to stabilizing the naira and restoring confidence in the country’s economy amidst challenging economic conditions.