AS the naira sustains gain against the dollar after months of uncertainties, the Central Bank of Nigeria (CBN), on Monday, March 25, announced the sales of $10,000 to each of the eligible Bureau De Change (BDC) operators in the country at the rate of N1,251/$1.
In a circular to the President of the Association of Bureau De Change Operators of Nigeria on Monday, the apex bank said the BDCs are to sell to eligible end users at a spread of not more than 1.5 per cent above the purchase price.
The circular was signed by the bank’s Director of Trade and Exchange Department, Hassan Mahmud.
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The CBN warned that “any BDC that breaches the above terms shall be sanctioned appropriately, including outright suspension from further participation in the sale”.
The apex bank had, on March 1, 2024, revoked the licenses of 4,173 BDCs over compliance failures.
Nigeria is battling rising inflation, food inflation, forex crisis, economic hardship, and high cost of living occasioned by the removal of petrol subsidies, attracting protests in parts of the country.
The naira has dipped in the last nine months since President Bola Tinubu’s administration collapsed the foreign exchange window.
The naira experienced an all-time low, falling from about N700/$1 in May 2023 to about N2,000/$1 in February 2024 before its appreciation in March.
The authorities have since focused on cryptocurrency websites like Binance, accusing them of speculation and clamping down on them through telecommunication companies.
Industry analysts lauded the move by the government but urged the government to pay attention to exports to sustain long-term gains of the naira against the dollar.
They argued that if the government failed to apply long-term measures to the naira gains, it could risk depletion of the reserve.
“This is why the naira is gaining. The CBN is selling at N1,251, so no trader locks in large transactions above N1,251.In essence, the naira has floated, but the CBN is intervening to strengthen the naira by selling its FX reserves to BDCs at a price below the willing buyer/ willing seller price. Implementations? The naira will gain value, but FX reserves are paying for it,” an economist, Kalu Aja, said while reacting to the development.
He further argued that the intervention is a band-aid, adding,” The CBN is attempting to fix a problem it can’t fix without a huge war chest of FX reserves. The long-term fix is to export.”
The ICIR reported the BDCs’ suggestions that the naira could only sustain gains against the dollar by sustaining liquidity in the foreign exchange market.
Kalu, however, insisted that foreign reserves could be depleted if Nigeria’s exports are not intense enough to sustain supply to the dollar market.
“If you want a strong naira, you export more,” he stressed.
A former Deputy Governor of the apex bank, Kingsley Moghalu, stressed the importance of exports to strengthen the naira.
He said, “The sooner we focus on the painstaking creation of a value-added manufacturing export economy that earns forex beyond oil in real and significant terms, the better. Key to this is the electricity conundrum in which we are at less than 4,000 megawatts of generation for a population of 200 million for decades now.”
On Thursday, March 21, the naira gained N18 to close at 1,382/$ at the official market, continuing its consistent upward trend against the US dollar.
The local currency saw significant gains at the official and unofficial foreign exchange exchanges the day before. On Wednesday, March 20, it closed at N1,400 per dollar at the black market.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.