ABCON Advises CBN on Constant Liquidity as Banks Stop Selling Dollar to BDCs
- Few banks have complied with the Central Bank of Nigeria's directive to sell dollars to BDCs
- ABCON president, Aminu Gwadebe, who lamented the development pointed out that just a few banks were selling to BDCs
- The naira appreciated by almost N100 to 1,552/$ from 1,660/$ the week before, according to Gwadebe
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Aminu Gwadebe, president of the Association of Bureau de Change Operators of Nigeria, said very few banks have followed the Central Bank of Nigeria's order to sell dollars to BDCs.
Source: UGC
Gwadebe, who stated this in an exclusive interview with Punch, examined the naira's strong performance in the parallel market over the previous week.
Earlier, the CBN temporarily allowed Bureau de Change operators to buy foreign currency from the Nigerian Foreign Exchange Market last December. That access was extended until May 30, 2025, in February. Later, the apex bank limited the BDCs' weekly purchases from a single authorised dealer bank to a maximum of $25,000.
Addressing this, the ABCON president claimed that the instruction had improved market liquidity at the retail level.
Gwadebe added that only a small number of banks were selling to BDCs were selling to BDCs.
He said:
“Just the announcement has helped even though not all the banks have started selling. Not more than three or four banks, as we speak, have started selling to Bureaux de Change. Now, imagine all the banks in Nigeria are calling BDCs to offer them their interbank proceeds. What could have happened?”
Market volatility is psychological
Gwadebe, who noted that the naira strengthened by roughly N100 to 1,552/$ from 1,660/$ in the previous week, opined that one of the issues facing the naira was psychological.
He said,
“The market’s volatility is mostly psychological. The naira is not strong just because of demand and supply. Still, we have seen a lot of uncertainty from both the government and private individuals putting pressure on the market, whereby everyone wants to substitute the naira for dollars. Due to this development, people are bringing out dollars to look for naira. The mop-up policy of the central bank indicates that there is not much liquidity in naira to pursue the dollar for frivolous demands.
“Idle naira in banks’ vaults creates an urge for hoarding and speculation. I’m sure with so many measures that the CBN is putting in place to ensure that there is no idle naira, especially for the banks to even start thinking of speculating.”
What CBN can do
Gwadebe reiterated that the CBN needs to maintain liquidity in the retail end of the market, saying,
“What CBN needs to do is ensure that there is liquidity, especially in the retail end of the market, and how will they do it? For instance, now that they said that the banks should sell foreign exchange to the BDCs, let them have the prudential target, say 20% or 50% of diaspora remittance should be BDC window by the banks. Once that is done, the CBN will be able to ensure that there is constant liquidity at the retail end of the market, and once there is that liquidity, you will see the naira getting stronger.
“It is a question of monetary oversight. It is a question of ensuring every participant is doing what it is supposed to do. The rules are there, but proper implementation of those policies is key.”
He stated that it has also been successful to make the BDCs one of the most efficient transmission mechanism tools of the central bank's foreign currency policy.
CBN extends deadline for BDCs to buy forex
Legit.ng earlier reported that to satisfy retail market demand for eligible invisible transactions, the Central Bank of Nigeria (CBN) extended its approval for BDC operators to buy foreign exchange from authorised dealers.
The new deadline is set for May 30th, according to a circular released on Monday by the regulator's Trade and Exchange Department.
Following an earlier directive, TED/FEM/PUB/FPC/001/030, dated December 19, 2024, which gave current BDCs temporary access to source foreign exchange from the Nigerian Foreign Exchange Market (NFEM), the extension permits BDCs to purchase foreign currency up to a weekly cap of $25,000 per operator. The original directive was set to expire on January 31st.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
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