Naira at 43-year low after CBN’s BDC forex ban

The naira fell to a record low of 282 against the dollar on the parallel market on Monday, immediately after the Central Bank of Nigeria (CBN) announced its decision to halt sales of dollars to bureau de change operators.

This new price, which the naira closed at, is the lowest the currency has been since its introduction – on January 1, 1973 – 43 years ago.

On Monday, Godwin Emefiele, governor of the apex bank, declared that the bank would no longer sell forex to BDCs, which he referred to as “greedy” in their sales.

“Whereas the Bank has continued to sell US Dollars at about N197 per dollar to these operators, they have in turned become greedy in their sales to ordinary Nigerians, with selling rates of as high as N250 per dollar,” he said.

“The CBN sells US$60,000 to each BDC per week. This amount translates to US$167 million per week, and about US$8.6 billion per year.

“In order to curtail this reserve depletion, we have reduced the amount of weekly sales to US$10,000 per BDC, which translates into US$28.4 million depletion of the foreign reserve per week and US$1.476 billion per annum.

“This is a huge hemorrhage on our scarce foreign exchange reserves, and cannot continue especially because we are also concerned that BDCs have become a conduit for illicit trade and financial flows.”

He said the CBN “would henceforth discontinue its sales of foreign exchange to BDCs”.

Emefiele revealed that BDCs had risen from 74 in 2005 to 2,786 in 2016, with about 150 new BDC applications coming in every month, and same promoter owning multiple BDC outlets.

The naira, which was trading at with BDCs around 279 earlier in the day, fell to N282 immediately after the announcement, with BDC agents confirming expected increase during the course of the week.