As part of its efforts to stabilize the Nigerian forex market, the Central Bank of Nigeria (CBN) on Thursday, announced a series of operational changes that will see the Bureau De Change back into the regulated FX framework.
In a memo titled: ‘Operational Mechanism for Bureau De Change Operations in Nigeria,’ signed by the Director of Trade and Exchange Department, O S Nnaji, the CBN outlined key measures aimed at streamlining and improving the mechanism of the BDC segment of the FX market.
Under the new framework, the spread on buying and selling by BDC operators is set to fall within a permissible range of -2.5% to +2.5% of the Nigerian Foreign Exchange market window’s weighted average rate from the previous day.
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Also, the new rules require the mandatory rendition by BDC operators of the statutory reports, including daily, weekly, monthly, quarterly, and yearly renditions. The reports are required to be submitted through the upgraded Financial Institution Forex Rendition System (FIFX), which has been upgraded to meet individual operators’ requirements.
Another notable aspect of the changes comes with accountability. The CBN warned operators that effective August 17, 2023, non-rendition of returns will attract sanctions, potentially – the withdrawal of operating licenses. The apex bank said in cases where BDC operators have had no transactions during a given period, they are required to submit “nil returns.”
This new mechanism brings the operation of Bureau De Change into regulatory scrutiny since over two years ago, when the suspended CBN governor, Godwin Emefiele, halted sales of forex to the BDCs.
The memo concluded by urging all BDC operators and the public to familiarize themselves with the new guidelines and adhere to them meticulously.
Since the meeting between the CBN governor Folashodun Shonubi and President Bola Tinubu on Tuesday, the financial regulator has begun to implement new policies aimed at stabilizing the floated forex market.
Shonubi said he has the president’s approval to implement a series of policies that will boost the performance of the naira in the FX market.
“Mr. President is very concerned about some of the goings on in the foreign exchange market. One of the things we discussed is what could be done to stabilize and what could be done to improve the liquidity in the market and also the goings on in the various other markets, including the parallel market,” he said.
Following the deregulation of the FX market, the parity between the official Investor & Exporter window and the parallel market widened by N205, as the naira fell to N955 per dollar. Shonubi attributed the situation to speculations and illegal activities in the BDC segment of the FX market.
Earlier, he said that most of the diaspora remittances were diverted to the parallel market with the help of bank officials, compounding dollar illiquidity in the I&E window.
On Thursday, the CBN announced the introduction of a foreign exchange (FX) price verification system (PVS) portal. The apex bank said a price verification report from the portal is now mandatory for all Form M requests, effective from August 31, 2023.
The changes are expected to boost the naira’s performance in the FX market, building on the progress the currency has recorded following the $3 billion emergency crude oil repayment loan taken by the Nigerian National Petroleum Company Limited (NNPCL) from Afreximbank. The loan, aimed at boosting dollar liquidity, has seen the naira gain about N100 in both the I&E window and the parallel market.