CBN Injects Liquidity, Allocates $20,000 to BDCs to Stabilize Naira

In a bid to address distortions in Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has implemented measures to bridge the gap in the exchange rate. Through a recent circular issued by Dr Hassan Mahmud, the Director of Trade & Exchange Department, the CBN has announced its decision to distribute $20,000 to each eligible Bureau De Change (BDC) operator across the country.

This move is part of the CBN’s broader efforts to achieve a market-driven exchange rate for the Naira and alleviate pressures on the parallel market. The allocated funds will be sold at a rate of N1,301/$, based on the lower band rate of executed spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as of the previous trading day, dated February 27, 2024. The aim is to inject liquidity into the market and stabilize the Naira’s value.

Additionally, the circular outlines guidelines for BDC operators, stating that they are permitted to sell foreign exchange to end-users at a margin not exceeding one percent (1%) above their purchase rate from the CBN. This measure is intended to prevent excessive mark-ups and protect consumers from price exploitation.

The CBN’s intervention is expected to enhance the efficiency of the foreign exchange market, providing a more transparent and equitable platform for the trading of the Naira. By directly addressing distortions in the retail market, the CBN aims to create a more stable economic environment conducive to growth and development.

Despite these efforts, the CBN continues to face challenges in curbing Naira depreciation and escalating inflation rates. With the first Monetary Policy Committee (MPC) meeting of the year concluding, there are high expectations for new monetary policy decisions aimed at addressing these issues.

Nairametrics