BDC Operators Say Inconsistent Dollar Supply from CBN Hampers Naira Recovery

People who trade money say the naira is getting weaker and the exchange market is always changing because the Central Bank of Nigeria (CBN) doesn’t always give Bureau De Change (BDC) operators dollars regularly.

BDC operators admit that when the CBN sells them dollars, it helps. But they point out that if the CBN does this only sometimes, people lose faith in the exchange market, making it unstable.

They want the CBN to give dollars at least once or twice a week.

On July 18, 2024, the CBN agreed to sell $20,000 to each BDC operator at a rate of N1450 per dollar. This action was meant to help with the shortage of dollars, especially for small buyers, and to make the naira stronger.

This decision came at a time when the demand for dollars was very high, and the rate was over N1600 for one dollar.

By selling dollars to BDCs, the CBN hoped to fix problems in the small buyer market and reduce the price gap between official and street rates.

CBN’s Efforts 

This was the fifth time the CBN has sold dollars to BDCs since it stopped in 2021 due to illegal trading issues.

In early 2024, the CBN started selling dollars again after taking licenses from over 4173 BDCs.

The first sale was in February 2024, with $20,000 sold to each BDC at N1,301 per dollar. Later, they cut this amount in half and sold at N1,251 per dollar.

These dollar sales by the CBN aim to increase the dollar supply and stabilize the foreign exchange market.

The CBN also sells dollars to authorized forex dealers and has reintroduced a system to auction dollars, selling $876.26 million to end-users through banks.

It seems the CBN listened to the Association of Bureau De Change Operators in Nigeria (ABCON), who have been asking to be part of the foreign exchange market to improve dollar availability, especially for small buyers.

ABCON says excluding them from the market and not giving them enough dollars weakens the naira and hurts the exchange policies.

Even with the CBN’s efforts, the dollar rate is still high and changeable, trading at N1590 in the street market.

BDC operators say the CBN doesn’t sell dollars often enough to have a lasting impact.

Need for Regular Sales 

Aminu Gwadebe, the President of ABCON, told Newslodge that selling dollars helps the naira gain value but said the inconsistency causes problems.

Gwadebe noted, ‘’The issue is the timing. For example, only one sale was done on the 18th of July, and it’s been three weeks without any more sales.’’ 

When asked if the CBN had delivered the promised dollars to BDCs without delays like before.

He replied, ‘’Yes, after the sales in January, they stopped in March and April, then on July 18th, they sold $20,000 again. Before that sale, the rate was around N1650, but it dropped to about N1580 after the sale.’’

‘’So it’s about consistency. If people don’t know when they’ll get dollars next, they lose confidence, which pushes them back to the street market, raising the rate again.’’ 

When asked how often they want the CBN to sell dollars.

The ABCON President said, ‘’Every week. There was a time we got dollars three times a week. We want it at least twice a week, but even once a week would help if it’s regular and with enough volume. This way, everyone knows when to come to the market, increasing liquidity. But if there’s no clear schedule, people won’t be encouraged to join the market.’’ 

Gwadebe added, ‘’Some people are discouraged because offices are centralized. They might go today and be told to return tomorrow, then come back and be told to wait again. This delay makes it harder for them. Even though improvements are being made, it’s an issue when it takes 3 to 4 days to receive payment.’’ 

Key Points 

• Earlier this year, the CBN started selling dollars to BDCs again after a suspension.
• This followed the removal of licenses from over 4,173 BDCs in February 2024 due to regulatory issues.
• The first sale in February 2024 had the CBN selling $20,000 to each BDC at N1,301 per dollar. The second sale halved the amount and had a rate of N1,251 per dollar.
• These actions by the CBN aim to increase dollar supply and improve the market’s efficiency, especially for small buyers.