The naira has strengthened by 1.3 per cent against the dollar in the official market as the Central Bank of Nigeria (CBN’s) plan to resume forex sales to Bureaux de Change (BDCs) begins September 7.
Funding for BDCs will provide more dollar liquidity to the parallel market to keep the naira stable.
The naira at the weekend opened for trade at N385.50 per dollar on the official market, supported by the CBN. It recovered to close at 381 per dollar, where it has been stuck since July, market data on naira rates movement showed.
Over 5,000 CBN-registred BDCs are expected to get $10,000 each at the twice-weekly auctions to be handled by approved agents across the six geopolitical zones.
President Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, explained that each BDC’s account will be funded with the naira equivalent of the $10,000 sale from Friday.
In a note to all BDCs, ABCON chief said the apex bank had warned that any act of hoarding and speculation will be penalized. He urged members to “trade only within allowable exchange rates with reliable documentation”. While the weekly sales volume is $10,000.0 per BDC, the CBN directed BDCs to buy at N384 and sell at a cap of N386.00/$1.00.
The naira recovery at the official market also benefitted from recoveries of the external reserves by 0.3 per cent week-on-week to settle at $35.7 billion as at August 28. Also, Brent gained 4.3 per cent week-on-week to settle at $45.6/bbl., reflecting improved sentiment in the oil market.
However, the exchange rate at the parallel market was unfazed by the new policy plan, as the naira stayed at N477 to dollar, its rate in the last two weeks.
This represents 20 per cent gap with the official market rate, creating room for abuse. The naira forward traded in London for the one-year settlement rose 3.64 per cent to 478 on Friday.
The CBN in a circular last week said it will restart dollar sales to BDCs from September 7 after it suspended auctions in March due to a coronavirus-induced lockdown and after a 15 per cent devaluation.
The CBN has made several moves to unify the rates , bowing to pressure from international lenders to merge its multiple exchange rates, eliminating arbitrage which has cost the country billions in reserves as it tried to defend the naira.
Report from Afrinvest West Africa, an investment and research firm, said the external reserves climbed 0.3 per cent week-on-week to settle at $35.7 billion as at August 28. Also, Brent gained 4.3 per cent week-on-week to settle at $45.6/bbl., reflecting improved sentiment in the oil market.
Activity level weakened by 48.6 per cent at the “Investors & Exporters Forex Window w to settle at $163.2 million from the previous week’s $317.4 million.