In an apparent move aimed at bridging the increasing gap in the value of the naira at the Retail Dutch Auction System (RDAS), the Bureau De Change (BDC) and parallel market, the Central Bank of Nigeria (CBN) Friday announced the removal of the limit of the amount of forex sales to BDCs.
Previously, BDCs were subjected to a limit of $250 million weekly.
But the central bank in a circular dated January 24, 2014, addressed to all authorised dealers and BDCs, a copy of which was posted on its website, explained that the policy was aimed at shoring up liquidity in the BDC segment of the foreign exchange market.
The document titled: “Developments in the Foreign Exchange Market: Foreign Exchange Sales to Bureau De Change Operators by Banks,” was signed by the Director, Trade and Exchange Department, CBN, Mr. Batari Musa.
It stated: “Further to the circular ref: TED/FEM/GEN/FPC/01/009 dated September 26, 2013 on the above subject, we write to inform all authorised dealers and the general public that the provisions of paragraph (1) of the circular under reference has been reviewed with immediate effect.
“Consequently, the limit of $250 million as the weekly forex sales to a BDC is hereby removed in order to shore up liquidity in that segment of the foreign exchange market.
“Authourised dealers are therefore free to sell to BDCs subject to compliance with the provisions of the extant AML/FT laws and regulations in the disbursement of forex.”
However, the central bank warned that all transactions between authorised dealers and BDCs as well as the latter and end-users must be supported with appropriate documentation.
In addition, it insisted that authorised dealers and BDC operators should continue to render weekly returns on their transactions to the central bank and other regulatory agencies, failing which appropriate sanctions, including revocation of operating licence would be imposed.
Concerned by the disparity in the value of the naira amongst other things, the CBN had at its first Monetary Policy Committee (MPC) meeting this year, assured Nigerian that it would address the foreign exchange supply imbalance to the BDCs.
The central bank had expressed concern that while the official rate of the naira opened with N157 to the dollar in 2013, it closed at N157.6, but the rate at the BDC was different as it closed at N170 to the dollar from an opening position of N159.5, a depreciation of over seven per cent.
To address the imbalance, the central bank had stated that it would look at the administrative limit placed on the amount BDCs could sell foreign exchange and possibly reverse it.
The MPC had also increased banks’ Cash Reserve Requirement (CRR) on public sector deposits from 50 per cent to 75 per cent.