The Central Bank of Nigeria (CBN) has granted Bureau De Change companies temporary access to the Nigerian Foreign Exchange Market (NFEM) from December 19, 2024 to January 30, 2025 for the purchase of forex to a weekly cap of $25,000.
By this move, the CBN would be selling up to $37.675 million to the 1507 operational BDCs in the country on a weekly basis.
“BDC operators can purchase FX under this arrangement from only one Authorised Dealer of their choice and will be required to fully fund their account before accessing the market at the prevailing NFEM rate.
This is as the Association of Bureaux Des Change Operators of Nigeria (ABCON) lauded the CBN for the lifting of the suspension on sales of foreign exchange to its members nationwide.
“All transactions with BDCs should be reported to the Trade and Exchange department, and a maximum spread of one per cent is allowed on the pricing offered by BDCs to retail end-users,” the Central Bank said in a circular that was signed by its acting director, trade and exchange department, T. G Aliu.
The statement said transactions require upfront funding at prevailing rates and must follow a maximum of 1% spread.
NFEM rate is derived at Volume Weighted Average and stands as the official exchange rate for the day.
CBN says PTA/BTA remain available at banks for personal & business travel needs. It insists that all legitimate FX transactions occur in the NFEM at market-determined rates.
The bank reminded the public of the continued availability of PTA/BTA from their banks to meet their personal and business travel requirements, and that all legitimate and eligible foreign exchange transactions are expected to be completed in the NFEM, at the market determined exchange rate.
“The CBN remains committed to a fully functional foreign exchange market and will continue to provide liquidity when necessary to manage price volatility. Please be guided accordingly,” Aliu said in the circular.
The expectation is that with the BDCs participation, the Naira would appreciate slightly.
Meanwhile, ABCON president, Aminu Gwadabe, ABCON, in a statement, said: “We are delighted that the CBN have considered our members’ accessibility to the New EFEMS Market through the banks. This development is a testament of the CBN’s recognition of our third level roles in the foreign exchange market architecture.”
As contained in the circular, the purpose is to meet the critical retail-end needs of the market where the BDCs have significantly played a potent and effective transmission monetary mechanism of the CBN policies.
Gwadabe said, the benefits to be achieved in the implementation of the circular includes, but not limited to: “Liquidity injection in the retail-end and enhancing price discovery, where volatility is pervasive, stable exchange rates, eliminate or reduce illegal economic behaviors like speculation and currency substitution in the economy.
“Other benefits includes job creation, Data generation, lower inflationary rate and improving the fragile security situation. To our members, it will revitalize our operations, making us functional and profitable.
“It will also improve our compliance obligations to security and monetary agencies. I therefore, urge all our members to act within the directives in the circular and ensure the desired result of the appreciation of our local currency is sacrosanct.
“BDCs should render their returns regularly, operate inside their offices and ensure seamless automation of their process.” Gwadabe also pleaded with banks to ensure transparency, level playing field in the discharge of their responsibilities to our members nationwide.”
