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One week after suspending the sale of foreign exchange to licensed bureau de change (BDC) operators, the Central Bank of Nigeria (CBN) has stopped the daily auction of forex to commercial banks.
 
Before this latest restriction in the forex market, the CBN made foreign exchange available at the interbank foreign exchange market, and also for “critical needs” such as matured letters of credit from commercial banks; importation of petroleum products; critical raw materials, plants and equipment; payment of school fees, as well as business and personal travel allowances.  

“We will not sell (dollars) on a daily basis anymore,” The Director of Financial Market, CBN, Emmanuel Ukeje said over the weekend. The Director said banks would have to manage their foreign currency deposits and source for forex by themselves. The CBN will, however, intervene in the foreign exchange market occasionally.

Without optimal levels of foreign reserves cover, the CBN can no longer sell foreign exchange to defend the naira. After the restriction on the BDCs last week, the naira, whose official exchange rate remains at N197 per U.S. dollar, crashed to over N300 per against the dollar. The local currency is expected to further weaken this week.   

Governor of the CBN, Godwin Emefiele, had said last week that the apex bank’s move against BDC operators was to reduce the pressure on the nation’s dwindling foreign reserves. The price of oil, which constitutes 70 per cent of government revenues and 90 per cent of total foreign exchange earnings, has crashed to below $30 per barrel from an average of $110 eighteen months ago. The nation’s foreign reserves have declined to $28.7 billion as at January 14.

According to the CBN, the main objective of its exchange rate policy is to preserve the value of the domestic currency, maintain a favourable external reserves position and ensure external balance without compromising the need for internal balance and the overall goal of macroeconomic stability.

Over the weakened, the CBN met with the Association of Bureau De Change Operators of Nigeria (ABCON) and agreed that the apex bank will source foreign exchange from International Oil Companies (IOCs) and other autonomous sources on behalf of BDCs.

Aminu Gwadabe, President, Association of Bureau De Change Operators of Nigeria (ABCON), said, “The CBN agreed to be sourcing for dollar from IOCs and selling to the BDCs between 198 and 201 to a dollar. We have also accepted to ensure that our members follow the regulatory guidelines and not sell dollars obtained through the autonomous sources over the required margin.”

The CBN said the BDCs and banks will share whatever amount of forex is available from autonomous sources.