BDCs shun dollars purchase as CBN pegs FX rate for invisibles at N360/$, injects $185m

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The Central Bank of Nigeria, CBN, yesterday, directed banks to sell dollars for invisible transactions such as personal travel allowance, business travel allowance, school fees and others at N360 per dollar.

For this purpose, the apex bank released  $85 million for sale to banks  N 357/$1 for onward sale to retail end-users at not more than N360/$ for  invisibles. The bank also offered $100 million to authorized foreign exchange dealers in the interbank wholesale window to meet the requests of genuine wholesale customers.

CBN Acting Director Corporate Communication Dept, Mr. Isaac Okoroafor, confirmed this to Vanguard, saying while the CBN will sell dollars to the banks for invisibles at N357 per dollar, the banks have been directed not to sell above N360 per dollar.

He said the rates in the interbank window for wholesale transactions would still be determined by activities in the interbank market.

He further disclosed that all the banks had also been directed to immediately post the new N360/$1 rate on electronic display boards in the banking halls of their branches, adding that examiners from the CBN would visit banks to ensure the new rates are implemented.

Experts react

Commenting on this development, President, Bank Customers Association of Nigeria, BCAN, Mr. Uju Ogubunka, said the directive of the CBN would provide succour for travellers and businesses.

He said: “The situation now looks like a fixed exchange rate, which in my opinion is better that having a system where you can’t plan or do anything because you don’t know what the rate is going to be.

“With the rate fixed, people can plan. And it is also a way of controlling the exchange rate differentials, moving from N480 to N360. To me, I think it’s fair enough. I believe the people will appreciate it.”

Similarly, Mr. Kunle Ezun, research analysts at Ecobank, described the new directive as a show of strength and capacity to support the naira.

Pegging exchange not solution —TUC

Reacting, Trade Union Congress of Nigeria, TUC, through its Secretary General, Musa Lawal said pegging or fixing the exchange was not the solution to the foreign exchange crisis confronting the country.

On his part, former Vice President of Nigeria Labour Congress, NLC, and Vice President of IndustriALL Global Union, Comrade Issa Aremu, said it was a commendable effort by CBN to shore up the value of the Naira, calling on the fiscal authorities to complement CBN’s efforts by releasing more funds to critical sectors of the economy.

Aremu who is also the General Secretary of the National Union of Textile, Garment and Tailoring Workers of Nigeria, NUTGTWN, called on the Ministers of Finance, Trade and Investment to unbundle the economy through more public spending in to boost local production and reduce the pressure on the Naira.

BDCs reluctant to buy dollars

In another development, bureaux de change operators are reluctant to purchase dollars from the public due to fear of further appreciation of the naira. This was aggravated by the uncertainty about the exchange rate the CBN will sell dollars to BDCs this week.

Hitherto the apex bank sold dollars to BDCs at N381 per and mandates them to sell at maximum of N399 per dollar. However, BDCs expect that the apex bank will this week review these rates downward given the appreciation of the naira in the parallel market.

A BDC chief executive, who spoke to Vanguard on condition of anonymity said: “The market is stagnant. We are expecting the CBN to review our rates, so for now nobody is willing to buy, except the seller is willing to sell at any rate agreeable to the BDC.”

President, Association of Bureaux de Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe said: “The situation is really frustrating. With the dollar selling at N380 in the parallel market, how can we sell at N400 per dollar?

“It is now unfair that the CBN has reduced the bank rate for invisibles to N360 per dollar. We hope that they will review the selling rate to BDCs.”, otherwise it would be difficult for our members to participate in the CBN’s weekly dollar sale.”

However, a CBN source, who spoke on anonymity, told Vanguard that the apex bank will for now still sell dollars to BDCs at N381 per dollar; he added that this is because the dollars sold to BDCs are sourced from International Money Transfer Organisations (IMTOs). “If the CBN reduce the rate, it will not be attractive to the IMTOs to supply dollars to fund the weekly sale to BDCs again,” he said.

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