Nigeria: CBN Greenlights $20,000 Allocation to BDCs to Address Market Distortions

In a proactive move to address distortions in the retail segment of Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has granted approval for the allocation of $20,000 to all eligible Bureau De Change (BDC) operators nationwide as part of its ongoing market reforms.

Dr. Hassan Mahmud, Director of the Trade and Exchange Department at CBN, conveyed this decision through a circular addressed to BDC operators. The aim is to curb pricing irregularities at the retail level, which has contributed to distortions in the parallel market, thereby widening the exchange rate premium.

The key points outlined in the circular are as follows:

1. Allocation Details:

   Each eligible BDC is granted the approval to purchase $20,000. The rate is set at N1,301/$, representing the lower band rate of executed spot transactions at NAFEM for the previous trading day (as of February 27, 2024).

2. Selling Guidelines for BDCs:

   BDCs are permitted to sell to end-users, maintaining a margin not exceeding one percent (1%) above the purchase rate from CBN.

3. Payment and Disbursement Process:

   All eligible BDCs are instructed to make Naira payments to designated CBN Foreign Currency Deposit Naira Accounts. Submission of payment confirmation and other necessary documentation for disbursement is to be done at designated CBN Branches (ABUJA, AWKA, LAGOS, and KANO).

4. Record-Keeping Requirements:

   BDCs must maintain comprehensive records of beneficiaries and the amount sold to each of them.

5. Limits on Forex Sales:

   BDCs are restricted from selling more than $4,000 per individual for Personal Travel Allowance and $5,000 for Business Travel Allowances.

6. Additional Guidelines:

   Guidelines include the allocated buying and selling rates for BDCs, prohibition of street hawking of forex, and the daily provision of Foreign Exchange sales to end-users.

This measure is part of the ongoing reforms in the foreign exchange market, focusing on achieving a market-determined exchange rate for the Naira. The CBN emphasizes compliance with the outlined guidelines, and BDCs are expected to contribute to maintaining stability in the foreign exchange market.