The reduction in the volume of forex sales to bureau de change (BDCs) operators by the Central Bank of Nigeria (CBN) may lead to short term pressure on dollar supply and naira depreciation at the parallel market, analysts have said.
The apex bank, in an effort to mitigate observed deficiencies in the operation of bureaux de change (BDCs) modified the licensing requirements for BDC operators.
Accordingly, the minimum capital requirement for the operation of BDCs in Nigeria was reviewed upwards to N35 million from N10 million while the cautionary deposit, expected to be deposited in a non-interest yielding account in the CBN by July 15, 2014, was also reviewed to N35 million (from USD20,000).
Furthermore, licensing fee was increased to N1 million (from N100,000); the annual renewal fee was increased to N250,000 (from N10,000) while application fee was pegged at N100,000. The volume of weekly foreign exchange sales to each BDC was also slashed by 70% to USD15,000 from USD50,000. Other rules included the annulment/rejection of ownership of multiple BDCs as well as disregard of mandatory membership of the Association of Bureau De Change Operators of Nigeria (ABCON) as a condition for the licensing of BDCs.
“While we appreciate the proactiveness of curbing forex drainage and dollarisation in the economy – against the backdrop of the current gradual and unsustainable depletion of external reserves position -, we anticipate the 70% reduction in weekly forex sold to BDCs might result in short term pressure on dollar supply to end users at the alternative markets”, analysts at Cowry Asset Management Limited have said.
Last week, the official naira/USD rate closed steady at N155.73/$1 as the central bank sold USD642.45 million (or N100.05 billion) to end users at its bi-weekly Retail Dutch Auction (RDAS), lower than USD660.34 million (or N102.83 billion) sold the preceding week.
However, the local currency depreciated at most alternative market segments amid inadequate supply. At the inter-bank market, the naira depreciated by 0.08% (or N0.13) to N163.05/$1 while it weakened at BDCs and the parallel (or ‘black’) market by and by 0.90% (or N0.5 ) to N167.00/$1 and 0.90% (or N1.5) to N168.50, respectively.
Also this week, inter-bank rates are expected to increase due to outflows from forex purchase at the bi-weekly RDAS without commensurate inflows.
