The Central Bank of Nigeria (CBN) has granted Bureau de Change (BDC) operators temporary permission to purchase up to $25,000 weekly in foreign exchange (FX) from the Nigerian Foreign Exchange Market (NFEM).ย The Central Bank of Nigeria (CBN) has granted Bureau de Change (BDC) operators temporary permission to purchase up to $25,000 weekly in foreign exchange (FX) from the Nigerian Foreign Exchange Market (NFEM).ย
This move, detailed in a circular dated December 19, 2024, is designed to meet seasonal retail demand for FX during the holiday period.ย
The circular was signed by T.G. Allu, on behalf of the Acting Director of the Trade and Exchange Department.ย
The arrangement will be in effect from December 19, 2024, to January 30, 2025.ย
Under the directive, BDCs may purchase FX from a single Authorized Dealer of their choice, provided they fully fund their accounts before accessing the market.ย ย
Transactions to occur at prevailing NFEM rateย
The transactions will occur at the prevailing NFEM rate, and BDCs are required to adhere to a maximum 1% spread when pricing FX for retail end-users. All transactions conducted under this scheme must be reported to the CBNโs Trade and Exchange Department.ย
The circular read: โIn order to meet expected seasonal demand for foreign exchange, the CBN is allowing a temporary access for all existing BDCs to the NFEM for the purchase of FX from Authorised Dealers, subject to a weekly cap of USD 25,000.00 (Twenty-five thousand dollars only). This window will be open between December 19, 2024 to January 30, 2025.ย
โBDC operators can purchase FX under this arrangement from only one Authorized Dealer of their choice and will be required to fully fund their account before accessing the market at the prevailing NFEM rate. All transactions with BDCs should be reported to the Trade and Exchange department, and a maximum spread of 1% is allowed on the pricing offered by BDCs to retail end-users.โย
The CBN assured the general public that PTA (Personal Travel Allowance) and BTA (Business Travel Allowance) remain available through banks for legitimate travel and business needs. These transactions are to be conducted at market-determined exchange rates within the NFEM framework.ย
This initiative reflects the CBNโs strategy to stabilize the FX market and manage seasonal surges in demand. The bank reiterated its commitment to ensuring a fully functional and liquid foreign exchange market while addressing price volatility.ย
What you should knowย
The CBN last month revised its guidelines, permitting licensed Bureaux de Change (BDCs) to purchase foreign exchange directly from Authorized Dealers.ย
- This is part of the central bankโs move aimed at streamlining Nigeriaโs foreign exchange (FX) market enabling the naira to reflect its true value.ย
- This decision, outlined in the CBN circular titled โRevised Guidelines for the Nigeria Foreign Exchange Market (NFEM)โ issued on November 29, 2024, marks a pivotal shift in the regulatory landscape for BDCs.ย
- For the first time in years, BDCs are now allowed to buy FX directly from Authorized Dealers, subject to a monthly cap set by the CBN.ย
- However, forex traders under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON) said the permission of BDCs to purchase foreign exchange directly from authorized dealers by the CBN is not automatic.ย
- It stated that participation is subject to meeting the new capitalization guidelines and requirements of BDCs introduced by the CBN in May 2024.ย
Nairametrics earlier reported that local currency maintained its ground during the fourth trading session of the week, despite the US dollar index oscillating at a two-year high.ย ย
- CBNโs ongoing reforms in the foreign exchange market have bolstered liquidity and confidence, with the naira settling below the N1,550/$ threshold in the official market.ย ย
- CBN data revealed that the Nigerian naira strengthened against the dollar on Thursday, closing at N1,540/$โa N5 gain from Wednesdayโs closing rate of N1,545/$ at the Nigerian Foreign Exchange Market (NFEM).ย ย
- The nairaโs value remained relatively stable at N1,660 to the US dollar in the black market.ย ย
The Nigerian apex bankโs reforms have played a pivotal role in promoting stability in Nigeriaโs foreign exchange market.
- The Bloomberg BMatch trading system, which went live on December 2, 2024, has enhanced efficiency and transparency in the official market.ย ย
- The CBN reiterated that the electronic FX matching system would continue to improve price discovery, address market distortions, and strengthen its ability to intervene, paving the way for a more stable and transparent foreign exchange system.ย ย
- In addition, the recent Eurobond issuance significantly boosted liquidity, at least in the short term.ย