The Central Bank of Nigeria (CBN) has intervened to save the naira against ongoing depreciation against dollar and other currencies with the sale of $20,000 to each of the licenced Bureaux De Change (BDCs).
The dollar injection came amidst persistent dollar scarcity forcing the naira to depreciate against other global currencies.
The CBN disclosed this in a statement signed to Director of Trade & Exchange department, Dr. W.J Kanya. It noted that BDCs are to sell to eligible end users at a margin not above the one per cent of the purchase rate of N1,580/$. Furthermore, the bank directed interested BDCs to make payment to CBN deposit accounts with them.
The statement reads, “The CBN has approved the allocation of $20,000.00 to each qualified Bureau de Change at an exchange rate of N1,580 per dollar. This measure aims to address the demand for invisible transactions.”
“All BDCs are permitted to sell to qualified end-users at a margin that does not exceed one percent (one per cent) above the rate at which they purchase from the Central Bank of Nigeria (CBN)”.
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The naira at the weekend, exchanged at N1,650 to dollar at the parallel market a significant fall compared with N1,590 to dollar it closed a week ago.
The local currency also suffered major fall against the Pounds Sterling as it closed the week at N2,180 to 1GBP as against N2,080 it exchanged a week ago.
However, the CBN injection of dollar into the retail end of the market through the BDCs is expected to reverse the naira loss, boost liquidity and meet dollar demands for travelers that want to buy Business Travel Allowances (BTA) and Personal Travel Allowances (PTAs).
In emailed note to investors, Managing Director/CEO Afrinvest West Africa Limited, Ike Chioke, said massive demand for PTAs and BTAs by travelers will continue weaken the naira, unless there are significant dollar inflows to boost FX positions in the economy.
According to him, the month of September comes with “seasonality effects” for PTAs, BTAs demand. Traveling abroad, whether for business or leisure, often requires access to foreign currency. In Nigeria, the Central Bank of Nigeria (CBN) has provisions for travelers to obtain forex under the BTA and PTA schemes.
Based on CBN’s guidelines, travelers can access $4,000 PTA per quarter and $5,000 BTA per quarter based on them meeting documentation requirements and availability of funds.
These allowances enable travelers to access the necessary funds for their trips without the hassle and high costs associated with unofficial exchange rates. Expanding on the development, the report said: “In the absence of significant inflow to boost FX supply, we expect the naira to be pressured in the month, due to the seasonality effect, as PTAs and BTAs demand peaks.”
President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said the injection of dollar into the market will have positive impact on the naira.
“I see the naira recording massive gains this week. We have started seeing the impact of the injection, with people holding back dollars releasing it to avoid huge losses,” he said.
Gwadabe said the BDCs are at the centre of exchange rate price control mechanisms, and funding for the sector goes directly to the retail end of the market.
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