CBN Crashes BDCs Exchange Rate To N1,101/$1, Offers $15.88m

The Central Bank of Nigeria (CBN) has crashed the exchange rate for Bureau De Charge (BDC) operators to N1,101$ from N1,251/$1, following rising inflow of the greenback into the country.
The apex bank also plans to sell $15.88 million to 1,588 eligible BDCs.
At this rate, the BDCs would sell at not more than 1.5 per cent margin to the public, thus selling at N1,117.5/$1.

Similarly, the apex bank also slashed the exchange rate for calculating Customs duties at the nation’s seaports by 1.1 per cent.

Information obtained from the official trade portal of the Nigeria Customs Service revealed that the apex bank slashed the Customs FX duty rate from N1,260.49/$ to N1,246.665/$ on Monday, April 8.
This equals about a 1.1 percent reduction in rate when compared to the old rate of N1,260.49/$ used for the opening of Form M as of Friday, April 5, and a decrease of N13.825 on a dollar needed to clear goods at the port.

In a letter addressed to the president of the Association of Bureau De Change Operators of Nigeria, the CBN announced the sale of $10,000 to the BDC operators at an exchange rate of N1,101 per US dollar.
ABCON president, Aminu Gwadabe, had appealed for the reduction in the rate at which the CBN sells dollars to its members to enable them keep up with the rapid appreciation of the domestic currency and the greenback.

This development aims to address retail market demand for eligible invisible transactions.
The letter, signed by W.J. Kanya on behalf of the director of trade and exchange department, outlines the directive for BDCs to sell the acquired forex to eligible end-users at a spread not exceeding 1.5 per cent above the purchase price.

This measure is intended to facilitate access to foreign exchange for legitimate transactions within the retail market.

Effective immediately, all eligible BDCs were instructed to commence payment of the Naira deposit to designated CBN Naira Deposit Account Numbers beginning from yesterday, April 8, 2024.
Additionally, BDCs must submit confirmation of payment along with other necessary documentation for disbursement at the relevant CBN branches.

Furthermore, the communication directed the BDCs to adhere strictly to the rules and conditions outlined in previous correspondences and circulars.
This development underscores the CBN’s ongoing efforts to regulate and stabilise the forex market, ensuring transparency and compliance within the Bureau De Change sector.
For further inquiries or clarifications, BDC operators are encouraged to contact the trade and exchange department of the Central Bank.

The Association of Bureaux De Change Operators of Nigeria (ABCON), the umbrella body of all licensed Bureaux De Change, had appealed to the CBN to adjust its applicable exchange rate downward to below the N1,251/$ it pegged for the BDCs.

In a letter to CBN the director, trade and exchange department, signed by ABCON national president Aminu Gwadabe, the association further expressed concern that many BDCs who funded their accounts for dollar allocations were yet to receive their allocation of dollars to meet the legitimate critical demand of their clients due to scrutinisation of the BDCs documents for collections at the various designated centres which invariably made the BDCs vulnerable to exchange rate risk and significant losses.

Meanwhile, the slash in exchange rate for paying import duty is coming on the back of continuous appreciation of the naira in the foreign exchange market with the naira trading at N1,251.05/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on April 5.
What this means is that importers opening Form M on Monday, April 8 for importation will have some measures of relief in terms of the money required to pay import duties compared to the importer who opened Form M on Friday, April 5.

Using the Form M exchange rate to calculate import duties is in line with the apex bank’s new directive that Customs should be using the rate on the date of submitting Form M for calculating import duties.

Meanwhile, there are expectations that the FX rate will witness further decline as the naira grows stronger even as the apex bank plans to sell $15.88 million to 1,588 eligible Bureau De Charge (BDC).