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In an effort to increase the effectiveness of the Nigerian foreign exchange market, the Central Bank of Nigeria (CBN) has released further guidelines for Bureau De Change (BDC) operators.
In an effort to calm the market, the apex bank barred the sale of dollars to BDCs two years prior to the decision. The most recent directive, however, makes no mention of the central bank starting to sell dollars to BDCs again.
According to the new operational system, which was outlined in a circular dated August 17th, the spread on purchases and sales made by BDC operators must fall within a permissible range of -2.5 percent to +2.5 percent of the weighted average rate of the previous days’ transactions on the Nigerian Foreign Exchange Market Window.
The Financial Institution Form Rendition System (FIFX), which the bank claimed has been upgraded to meet the needs of individual operators, was ordered to be used by BDC operators for the mandatory rendition of the statutory periodic reports (daily, weekly, monthly, quarterly, and yearly) by the bank. The circular was signed by O.S. Nnaji, the Director of Exchange Department.
The top bank issued a warning that failure to submit returns would result in penalties, including the possible revocation of an operating license, effective as of the date of the circular.
“Operators are supposed to provide nil returns if they have no transactions throughout the timeframe. Please follow these instructions and be sure to comply, the circular requested.
Background
The CBN stopped selling foreign exchange to Bureau De Change operators in August 2021, claiming that the parallel market had turned into a conduit for shady currency transfers and corruption.
The bank declared that it would no longer handle BDC license applications within the nation.
The CBN’s weekly foreign exchange sales were afterwards planned to go through commercial banks, according to Godwin Emefiele, the CBN’s suspended governor, at the time.
“We are concerned that BDCs have allowed themselves to be used for graft,” Mr. Emefiele stated.
He said that some embassies and donor organizations, among other international organizations, had participated in illicit FX transactions that had impeded the inflow of foreign currency into the nation.
The order was given a few days after President Bola Tinubu and interim central bank governor Folashodun Shonubi met.After the meeting, he told reporters, “We do not believe that the changes taking place in the parallel market are driven by pure economic demand and supply but are topped by speculative demand from people.”
The head of the bank claimed that he discussed some of the solutions with President Tinubu.in which he attributed speculators for the high dollar to naira exchange rate at BDCs. He declared that the government will take action to regulate currency speculators’ actions.
We believe the things we’re doing when they come to fruition may result in large losses to them, so the speculators should be careful sooner rather than later, according to some of the plans and techniques that I’m not at liberty to disclose with you.
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