CBN Brings Backs BDCs, Caps FX Spread
In its latest decision to re-integrate operations of Bureau De Change (BDCs) into foreign exchange markets, the Central Bank of Nigeria (CBN) said it pegged the spread on FX sales to users at – (+) 2.05% – an allowable limit for any FX trades in the open market.
The apex bank made the move to bring back activities of the open market currency traders into the fold after the local currency’s continual decline. On Friday, the CBN announced new measures capping foreign currency transactions carried out by BDCs in a bid to narrow the gap between the official and parallel market rates.
The Naira is facing tough market pressures, with a large daily swing due to a dearth of fx inflows in the market despite a solid demand record. The apex bank had derecognised BCDs chain a few years ago, citing infractions and terrorism financing.
However, Nigeria FX users have flooded the open market following increased regulatory requirements and bureaucracy of getting foreign currency from local banks. Time, for most Nigerians that require dollars, is of essence.
However, the apex bank requires documents and form filling which make it a tough experience dealing with deposit money banks in the country – then the open market becomes an option due to nil documentation requirement – especially tax certificate which most Nigerians don’t have.
In a circular signed by Dr. O.S Nnaji, Director, Trade and Exchange unit, the CBN said the spread on buying and selling by BDC operators shall be within an allowable limit of -2.5% to 2.5% of Nigerian foreign exchange market window weighted average rate of the previous day.
The bank has also ordered BDCs to provide statutory daily, weekly, monthly, quarterly, and annual reports on their transactions, failure of which “would attract sanctions which may include withdrawal of operating license. Acting central bank governor Folashodun Shonubi flagged new measures for the currency market on Aug 14, as pressure mounted on the naira. Nigerian Treasury Bills Yield Rises to 7%