•• Increased Forex Inflow and Investor Confidence Boost Local Currency
By Anastasia John E.
The recent strengthening of the naira against the US dollar has been attributed by Bureau De Change (BDC) operators to the Central Bank of Nigeria’s (CBN) policy allowing authorized dealers to sell foreign exchange directly to licensed currency traders. BDC operators report a surge in forex inflow into the interbank window, fueled by growing investor confidence and substantial portfolio investments in banks.
The CBN introduced the revised guideline in December 2024, enabling licensed BDCs to purchase forex directly from authorized dealers. This move aimed to streamline Nigeria’s forex market and allow the naira to reflect its true value. Initially, the policy faced challenges due to banks’ reluctance to implement it fully, prompting an appeal for extension by the BDCs. The CBN responded by extending the deadline for weekly forex purchases to May 30, 2025.
Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), confirmed the positive impact of the CBN circular. He noted that many banks have commenced direct forex sales to licensed BDCs, significantly influencing the forex market. Gwadebe explained that the circular allows BDCs to source forex from the interbank window, including proceeds from direct remittances and export proceeds held by banks. He highlighted the increased investor confidence and substantial portfolio investments flowing into banks, providing them with the capacity to sell forex to BDCs.
While acknowledging the potential influence of the Chinese holiday on market activity, Gwadebe emphasized that factors like panic buying, speculation, and currency substitution exert greater pressure on the naira. He pointed out that during Chinese holidays, transaction volumes decrease significantly.
Another BDC operator, Mallam Adamu, observed the fluctuating nature of the forex market, noting that while the CBN policies could be a contributing factor, he wasn’t certain. He mentioned an increase in selling activity alongside buying.
It’s important to recall that the CBN’s December 2024 policy update, as previously reported by Nairametrics, requires BDCs to meet specific capitalization guidelines (N500 million for Tier-2 and N2 billion for Tier-1 operators) to participate in direct forex purchases from authorized dealers. The CBN also lifted the suspension of interbank forex sales to BDCs nationwide, a move expected to curb inflation, create jobs, and boost forex liquidity. Furthermore, the CBN recently introduced a new guideline limiting BDCs to purchasing their weekly $25,000 allowance from a single authorized dealer bank to prevent speculative activities.
