LAGOS, Nigeria (VOICE OF NAIJA)– With fears rife over the crashing of the foreign exchange rate to the naira, currency hoarders are being forced to sell off what is in their custody.
From available information sourced from various platforms, the naira is fast gaining value fueling worries that those still hoarding the forex are in for a shock.
Details gleaned from the LSEG Data & Analytics, one of the world’s largest providers of financial markets data and infrastructure, showed that the naira firmed to 1,312.51 per dollar during mid-day trades on Friday, after the CBN revealed that it had cleared its entire verified foreign exchange backlog.
The naira, hitherto on a downward spiral since a devaluation in January, its second in less than a year, traded at N1,301 naira per dollar on Friday.
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However at the close of transactions at the I&E forex window, the naira was quoted at N1,431.49 as against the previous close of N1,453.28
The apex bank said on Wednesday that it had paid commercial bank customers $1.5 billion to settle outstanding obligations that put the local currency under pressure.
The naira last month fell to a low of N1,778.25 to the dollar, weighed down by high demand for the U.S. currency and outstanding forwards on the currency that needed to be settled by the central bank.
Speaking with a cross section of BDC operators, they confirmed to our correspondent that the dollar rate has been falling lately due to fear of a crash of the FX.
Abdullahi Dollar, one of the operators in Mushin axis of Lagos, revealed that lots of customers have been dumping their dollars because of the anticipated fears that it might crash further in the coming days.
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It would be recalled that the apex bank had last month announced its decision to sell foreign exchange worth $20,000 to each eligible Bureau De Change operator across the country.
The development came three years after the former CBN governor, Godwin Emefiele, announced the suspension of foreign exchange sales to BDC operators.
According to data obtained from the CBN website, there are 5,690 BDC operators nationwide.
However, about 1,373 BDC operators have been screened to get the allocation. The breakdown includes Abuja, 186; Awka, 26; Kano, 376; Lagos, 785.
On July 27, 2021, the CBN discontinued the sale of foreign exchange to BDCs accusing them of trading FX wholesale that amounts greater than USD 5000, in contravention of their licences, and Nigeria’s FX regulations.
READ ALSO: Foreign Reserves Hit $34.11bn As CBN Clears FX Backlog
The latest circular, approving sale of forex to the BDC operators was titled, “Sale of Foreign Exchange to Bureau de Change Operators to meet retail demand for eligible invisible transactions.”
It noted that the move aimed at rectifying the persisting distortions in the retail segment of Nigeria’s foreign exchange market and bridge the widening gap in the exchange rate.
It said the allocation would be sold at a rate of N1,301/$, reflecting the lower band rate of executed spot transactions at the Nigerian Autonomous Foreign Exchange Market as of the previous trading day, dated February 27, 2024.
This means BDCs will buy at N1,301 and sell at ₦1,314.01.
The circular read, “Following the ongoing reforms in the foreign exchange market, aimed at achieving an appropriate market-determined exchange rate for the Naira, the Central Bank of Nigeria has observed the continued price distortions at the retail end of the market, which is feeding into the parallel market and further widening the exchange rate premium.
“To this end, the CBN has approved the sale of foreign exchange to eligible Bureau De Change to meet the demand for invisible transactions. The sum of $20,000 is to be sold to each BDC at the rate of N1,301/$- (representing the lower band rate of executed spot transactions at NAFEM for the previous trading day, as of today, 27th February 2024).
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“All BDCs are allowed to sell to end-users at a margin NOT MORE THAN one per cent (1 percent) above the purchase rate from CBN.”
The CBN, as part of fresh efforts to save the free fall of the naira, has rolled out a number of significant initiatives, including probing and clearing FX backlog, limiting forex for foreign education and medical tourism, and increasing BDCs’ minimum share capital.
In a related development, the President of the Association of Bureau De Change of Nigeria, Aminu Gwadebe, had only recently suggested that the CBN should build a synergy of cooperation in order to tap into the strengths and network of BDC operators to strengthen the naira.