The Central Bank of Nigeria (CBN) has announced an extension of the temporary arrangement that allows Bureau de Change (BDC) operators to purchase foreign exchange (forex) from authorized dealers. This decision, which extends until May 30, 2025, was communicated through a circular issued on February 3, 2025, maintaining the weekly cap of $25,000 for forex purchases. The move ensures continued access for BDCs to foreign exchange and reinforces the CBN’s efforts to maintain liquidity in the forex market.
Initially set to end on January 31, 2025, the CBN’s temporary provision to BDCs was designed to help meet retail demand for foreign currency, particularly for invisible transactions like personal remittances and business-related exchanges. The extension of this measure, outlined in the latest circular, maintains all terms and conditions previously set, including the $25,000 weekly purchase limit. This ongoing support indicates the CBN’s commitment to stabilizing the forex market amidst rising demand.
This extension also comes at a critical time for Nigeria’s foreign exchange reserves, which have been on the decline. In January 2025, Nigeria’s forex reserves dropped by $1.11 billion, a reduction of 2.72% from the beginning to the end of the month. Despite this decrease, the CBN’s decision to continue the forex sale arrangement suggests its willingness to manage liquidity and address price volatility in the market.
Although Nigeria’s naira appreciated during the same period, the drop in forex reserves highlights the challenges the CBN faces in maintaining sufficient foreign exchange to support both domestic economic activity and external debt servicing obligations. The continuation of BDC forex access may be one of the CBN’s key tools to mitigate these challenges, providing essential liquidity to retail forex markets.
The CBN’s strategy includes a focus on minimizing speculation and stabilizing the exchange rate. Over the past year, the apex bank has taken measures to enforce stricter regulations on BDCs, with an emphasis on compliance and reforms aimed at unifying the exchange rate. The extension of forex sales to BDCs represents a critical element of this ongoing strategy, signaling the CBN’s careful management of forex resources in a volatile global economic environment.
Source: PUNCH