The Central Bank of Nigeria has stepped up dollar sale to the Bureau de Change segment of the foreign exchange market in order to boost liquidity and save the falling naira.
As a result, the CBN will on Friday intervene in the BDC segment of the market by selling $30,000 to each of the over 2,500 BDC operators.
This is in addition to the $30,000 weekly sales to each of the BDC firms.
The development came barely two weeks after the central bank raised its weekly dollar sales to the BDCs from $15,000 to $30,000.
A circular issued by the CBN on Tuesday informing the BDCs of the new $30,000 sale limit stated that the development was meant to boost liquidity in the market.
The circular signed by the Director, Trade and Exchange, CBN, Mr. Olakanmi Gbadamosi, read in part, “This is to inform all licensed BDC operators that in order to improve liquidity in the BDC segment of the foreign exchange market, the CBN will be intervening in the market by selling $30,000 to interested BDCs on Friday, February 6, 2015. This is in addition to the weekly sale to the operators.”
The central bank asked interested BDCs to fund their accounts on or before Wednesday to benefit from the intervention.
The bank has been trying to narrow the gap at which the naira, hard hit by the drop in oil prices, trades on the interbank market through regular interventions and is also trying to curb speculation.
In the last one year, the bank had depleted its reserves by 20 per cent, spending $28m a day to defend the currency, which has been under unrelenting pressure from a lack of petro-dollars.
By the end of January, the reserves stood at $34.28bn.
The naira sold for 209 to the dollar in the parallel market operated by the BDC agents on Tuesday, while the interbank market rate hit N190.08 on thin trades.
At the BDC, documentation to buy dollars is less rigorous but the operators usually sell in small lots, compared with the interbank market, which can transact over $100m a day.
The currency firmed marginally to close at N189.15 on the interbank market on Tuesday after the central bank intervened and two oil companies sold dollars. The naira closed at 189.25 on Monday.
Dealers said the local units of Mobil and Chevron sold $82.5m to some lenders to buy naira for their local operations.
Industry analysts recently predicted that the naira would likely exchange against the dollar for over 220 soon.
According to the experts, the naira has remained under continued pressure due to the continued fall in the prices of crude oil in the international market and increased demand for the dollar locally.
The development, they said, would lead to a number of economic challenges this year.
The President, Association of Bureau de Change Operators, Mr. Aminu Gwadabe, said there was the need for the CBN to increase the dollar sales to the BDCs from the current $30,000 to $50,000.
He argued that the development would help to stabilise the naira and stop speculative activities.
Gwadabe, however, predicted that “after the elections, the naira will sell above 220 against the dollar at the parallel market.”
“And it is also noteworthy to say that the CBN will devalue the naira again after the February elections. The reason is due to the falling oil prices and the current demand pressure we are witnessing on the dollar,” he added.
The naira is expected to be under more pressure as politicians seek more dollars to fund campaigns in the run up to the elections.
“We cannot rule out the fact that politicians are fuelling the demand at the street market because most of them prefer to provide their gratification during this election period in dollars,” Gwadabe had said.