Economy Watch

Sale of Forex to Banks Gulps $1.65b

The Central Bank of Nigeria (CBN’s) total foreign exchange (forex) sales to commercial banks declined to $1.65 billion in August 2021 from $2.05 billion in July. BIt dropped to current new low despite the apex bank’s stoppage of weekly dollar allocation to Bureaux de Change (BDCs) in July over alleged forex racketeering.

The CBN’s forex report for August showed its continued intervention in the foreign exchange market to ensure systemic stability and adequate liquidity. Total forex sales to authorised dealers by the bank was $1.65 billion in August, representing a decrease of 19.3 per cent relative to $2.05 billion in July.

A breakdown showed that forex sales to interbank, Swap transactions and Small and Medium Enterprises (SMEs) interventions rose by 63.5 per cent, 72.3 per cent, and 42.5 per cent to $0.28 billion, $0.46 billion, and $0.17 billion, respectively.

CBN Governor Mr. Godwin Emefele had, at the end of July Monetary Policy Committee (MPC) meeting, while briefing journalists on MPC decision, announced the stoppage of sale of foreign exchange to Bureau de Change (BDC) operators. In the review period, the new bank policy, which has been met with scepticism by the volatile forex market, will not award new licenses to BDCs.

The CBN will only sell forex to Deposit Money Banks (DMBs) for resale to the general public under the new regime. The CBN had directed all DMBs to set up teller points at designated branches across the country to fulfill legitimate forex requests for Personal Travel Allowance (PTA), Business Travel Allowance (BTA), tuition fees, medical payments, and SMEs transactions to ensure a smooth implementation of the new policy.

Apparently, during the stoppage of the weekly direct allocation of foreign exchange to the BDCs, the CBN was selling $20,000 each to over 5,300 BDCs per week. This amount translates to about $110 million per week and about $5.72 billion per year.

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