CBN confirms resumption of dollar sales to FPI, naira firms
The Central Bank of Nigeria (CBN) has confirmed that it intervened in the Investors and Exporters (I&E) window to prompt the appreciation of the local currency, hitting hard speculators on the domestic foreign exchange market.
In a statement late Wednesday, the regulatory bank said Prior to its renewed intervention in the I&E window on Monday, August 31, 2020, the Naira exchanged for as high as N480 to the dollar, prompting fears that the Naira was in a free fall.
However, the naira began to rebound against the dollar following an announcement by the CBN that it would also resume the sale of foreign exchange to operators of Bureau de Change (BDCs) from Monday, September 7, 2020.
Compared to the previous days’ sales, the naira exchanged for N420 to a dollar in the BDC segment of the market on Wednesday, September 2, 2020, plunging speculators into losses, following their failure to heed warning signs from the CBN.
The regulatory bank’s Director, Corporate Communications, Isaac Okorafor reiterated that the Bank had concluded plans to inject liquidity into the foreign exchange market by selling forex to licensed BDC operators.
Global Financial Digest had exclusively reported that CBN sold dollars to some portfolio investors who are eager to repatriate their funds out of the country, boosting dollar liquidity on the Investors’ and Exporters’ (I&E) window, quoting currency traders.
Okorafor said the sale to BDC would be gradual and be done twice a week – Mondays and Wednesdays, hence the BDCs had been directed to ensure that their accounts with their banks are adequately funded to ensure seamless transactions.
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He warned speculators to desist from what he termed unpatriotic tendencies and urged registered BDCs to comply with the CBN guidelines as the Bank would not hesitate in sanctioning any erring dealer. He also assured that those requiring foreign exchange for purposes of travel, educational fees and other invisibles could obtain such over the counter from their respective banks.
Also, the President of the Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe has expressed support for the CBN action, noting that the anticipated intervention in the BDC sector would ensure stability in the foreign exchange market.
Gwadabe said speculators in the forex market have been dealt a huge blow with the sharp drop in the exchange rate, which he said would continue a downward trend with the resumption of international flights in and out of the country.
The regulatory bank in a circular signed by its Director, Trade and Exchange Department, Ozoemena Nnaji, on Thursday had disclosed plans by the CBN to resume the sale of foreign exchange to BDCs as part of effort to enhance accessibility to foreign exchange.
Traders had told one of our correspondents that the CBN sold dollars to some portfolio investors who are eager to repatriate their funds out of the country, boosting dollar liquidity on the Investors’ and Exporters’ (I&E) window, currency traders said.
Though the amount of dollar sold by the regulator was not disclosed, it was learnt that the sales increased the level of liquidity in the market and helped the naira to appreciate against the dollar on the window.
Dollar liquidity on the I&E window closed at $58.48 million on Tuesday while the naira closed flat at N286 per dollar at the window.
Many foreign portfolio investors have since March been waiting on the CBN to provide dollars in the market to enable them to exit the country due to the economic outlook and the collapse in yields on fixed income assets, but the regulatory bank had hurt dollar sales as part of measures to conserve its reserves.