The local currency, Naira, described as a best performing currency recently is losing its steam in the official and black markets.
This is because, the exchange rate between the Naira and Dollar on the official NAFEM window has nosedived to a week-to-date low of N1,234.49/$1 on Monday, 22nd of April 2024. This is a sharp depreciation from the official exchange rate N1,169.99/$1 recorded on Friday 19th of April 2024, which was also a 6-day low.
Also, the naira remained above the N1200/$ band in the unofficial market, causing the Nigerian currency to pause its winning streak against the American dollar on a weekly spectrum.
The naira’s surge since late March, which had made it the best-performing currency in the world, came to a stop on Sunday when it had its first weekly decline in several weeks on the parallel market.
The break in the naira’s rapid rally coincided with a strengthening of the US dollar.
Amid this, the Central Bank of Nigeria (CBN) has issued another circular to Bureau De Change (BDC) operators, informing them of direct sales of US dollars at a discounted rate of N1,021 per dollar.
The development is aimed at addressing the retail-end market, particularly for invisible transactions such as travel allowances, tuition fees, and medical payments.
The policy involves selling a total of $10,000 to each eligible BDC for onward sale to end users.
These BDCs are then required to sell to the end users with a maximum markup of 1.5% over the buying price.
This move marks the second of such sale this month and the fourth in the current year, reflecting a proactive approach to managing currency fluctuation and meeting essential foreign exchange needs.
The CBN, in February 2024, announced the selling of $20,000 to each BDCS at the rate of N1,301/$. By the second attempt, the bank reduced the allocation by 50% and sold FX at a rate of N1,251/$1. Earlier this month, the apex bank had a sale of $10,000 to each BDC at a rate of N1,101/$1.
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The circular read:
“We write to inform you of the sale of $10,000 by the Central Bank of Nigeria (CBN) to BDCs at the rate of N1,021/$1. The BDCs are in turn to sell to eligible end users at a spread of NOT MORE THAN 1.5 percent above the purchase price.
“ALL eligible BDCs are therefore directed to commence payment of the Naira deposit to the underlisted CBN Naira Deposit Account Numbers from today, Monday April 22, 2024, and submit confirmation of payment, with other necessary documentations, for disbursement of FX at the respective CBN Branches.”
Based on the earlier circular that CBN had provided a list of 1588 eligible BDCs, it would cost the apex bank about$15.9 million dollar allocation, all aimed at stabilising the market and the local currency.
Yemi Cardoso, CBN governor had recently stated that interventions in the BDC segment are minimal and targeted at ensuring effective integration into the broader market.
The explanation was on the backdrop of concerns around the depleting foreign exchange reserves, which dipped by $2.33 billion in 31 days.