Naira set to strengthen with new BDC dollar limit

Financial market analysts have said that the naira would strengthen as the Central Bank of Nigeria announced that licensed Bureau de Change operators can purchase up to $150,000 weekly.

The experts spoke to The PUNCH in separate chats on Wednesday following the move of the CBN.

In a circular signed by the Director of the Trade and Exchange Department, Dr Musa Nakorji, and addressed to authorised dealer banks and the general public on Tuesday, the apex bank said that the move was aimed at improving foreign exchange liquidity in the retail segment of the market and meeting the legitimate needs of end users.

The Chief Executive Officer of Arthur Stevens Asset Management, Tunde Amolegbe, said the naira is likely to strengthen further against the United States dollar as forex availability improves.

“Expect further strengthening of the naira against the US dollar, which will be positive for companies with significant foreign currency-denominated inputs such as consumer goods and industrial companies,” Amolegbe said.

According to him, a firmer domestic currency would reduce the cost burden on manufacturers and import-dependent firms, particularly in the consumer goods and industrial sectors where raw materials and machinery are largely dollar-denominated.

Similarly, the Head of Financial Institutions at Agusto & Co., Ayotunde Olubunmi, described the development as part of broader CBN efforts to address distortions in the foreign exchange market, especially the widening gap between the official and parallel market rates.

“This is one of the measures by the CBN to address the widening gap between the official market and the parallel market. This is expected to improve liquidity of the BDC segment and moderate the margin,” Olubunmi said.

He explained that increasing liquidity in the Bureau de Change segment should reduce speculative pressure and arbitrage opportunities, thereby narrowing spreads and promoting a more unified exchange rate framework.

The Chief Executive Officer of CFG Advisory, Tilewa Adebajo, also emphasised the importance of widening forex distribution channels.

“Availability of forex through more channels is helping with rate stabilisation,” Adebajo said.

The apex bank also imposed strict reporting and transparency requirements, directing that “all licensed BDCs shall ensure the timely and accurate submission of returns to the Central Bank electronically and in accordance with extant regulations.”

Also, BDCs are mandated to sell back all unutilised balances to the market within 24 hours, stating that “BDCs are not permitted to keep funds purchased from NFEM in their positions.

“Settlement of foreign exchange transactions by BDCs with Authorised Dealers and/or with end-user customers shall be conducted exclusively through settlement accounts held with licensed financial institutions. Third-party transactions are prohibited, and settlement of foreign exchange sales in cash is limited to a maximum of 25 per cent of each transaction amount.”