CBN Stops Sale Of Forex To BDCs And Says Bank Customers Can Now Resume Using Forex Accounts...

This is good News if you used to operate a forex ACCOUNT in Nigeria!

The Central Bank of Nigeria, CBN, has stopped, with immediate effect, the sale of foreign exchange, forex, to Bureaux de Change, BDCs, as part of measures to reduce the pressure on the nation’s foreign reserves.

The reserves, which closed last year at $28.364 billion, dropped last weekend to $28.193 billion, showing a depletion by $170 million in the first trading week of this year. To date, it had lost about $3.8 billion since mid last year when CBN announced a recovery to $31.8 billion.

As the new policy shift was being announced, yesterday, the national currency, Naira, completely reversed its Christmas gains, hitting a new low value of N283/USD1 in  BDCs and the parallel markets. The currency had gained from low business cycle of Yuletide and informal supplies from returning Nigerians, appreciating to N265/$1.0 against N281/$1.0 it recorded in the middle of last month.

The Governor of the CBN, Mr. Godwin Emefiele, who announced the policy change in Abuja, yesterday, said BDCs are now to source forex from the autonomous market.

He also announced that members of the public can now resume transactions on their domiciliary accounts.  That means bank customers can now resume depositing of foreign currencies in their accounts with their banks.

He described the insatiable appetite of BDCs for forex as “a huge hemorrhage on our scarce foreign exchange reserves, and cannot continue especially because we are also concerned that BDCs have become a conduit for illicit trade and financial.”

Emefiele said BDCs operators who cannot cope with the new regulation had the option of turning in their licences to collect their N35 million cautionary deposits with the CBN.

On foreign currency deposits

On foreign currency deposits, Emefiele said: “The bank would now permit commercial banks in the country to begin accepting cash deposits of foreign exchange from their customers.”

According to the governor, the policy objectives for banning the foreign currency deposits have been achieved.

He explained that CBN put the policy in place because it discovered that speculators were withdrawing their Naira deposits and using same to buy up foreign currencies and then depositing same in banks and waiting to change the same at higher rates.

Policy Change and IMF connection

The CBN’s policy was also coming on the heels of criticism of its stringent forex measures by Managing Director of the International Monetary Fund, IMF, Mrs Christine Lagarde, while on official visit to Nigeria last week.

Financial analysts at Afrinvest Group, a Lagos-based investment house said “with the visit of the IMF boss where emphasis was laid on further flexibility in the management of the currency, we believe the apex bank may review its current position on the pricing of the Naira going forward.”

According to them “the IMF’s position on the management of the Naira was not surprising given the pressure on the value of the Naira in the parallel market which has amplified the calls for further devaluation of the Naira.

“The IMF advocated for more flexibility in the management of the local unit in order to stem the rout on the Naira as the capacity of the CBN to defend the Naira wanes (depleting external reserves).

“Thus, we imagine that the CBN may need to review its position on the pricing of the Naira going forward.

“In conclusion, the visit of the IMF Boss seemed timely as we expect this to give policy makers an opportunity to review their stance on critical issues in the economy within the context of global perception as the country makes hard choices in 2016”.

Vanguard extract.

Good indeed!