CBN Set to Boost Naira: Resumes Weekly Forex Interventions for BDCs
The Central Bank of Nigeria (CBN) has announced plans to reinstate its weekly intervention in the foreign exchange (forex) market through Bureau de Change (BDC) operators.
The decision comes after the CBN halted forex sales to BDCs in 2021 as part of efforts to address forex scarcity and enhance the value of the naira.
However, the current move signals a strategic shift to inject liquidity into the forex market through targeted interventions.
Starting this week, the CBN will resume its weekly intervention program, which involves both funding and collection processes.
The initiative aims to supply much-needed forex to BDCs, which play a vital role in ensuring liquidity and accessibility of foreign currency to businesses and individuals across Nigeria.
Under the plan, designated CBN branches in Lagos, Abuja, Kano, and Awka will facilitate the collection of forex funds for BDCs.
Moreover, the CBN will publish a list of eligible BDCs based on specific compliance criteria, ensuring transparency and accountability in the distribution process.
The Association of Bureau De Change Operators of Nigeria (ABCON) welcomed the CBN’s decision, highlighting its potential to boost market liquidity and stabilize the naira against major currencies, particularly the US Dollar.
ABCON emphasized the need for its members to adhere strictly to regulatory guidelines, warning that any infringement or non-compliance would lead to license revocation and legal action.
The move underscores the CBN’s commitment to implementing effective monetary policies geared towards fostering economic stability and restoring confidence in the Nigerian financial system amidst prevailing challenges.
Nigeria’s Modular Refineries Grapple with Forex Woes, Operations at Risk
Nigeria’s modular refineries, a critical component of the country’s petroleum industry, are facing an existential threat due to challenges in accessing foreign exchange (forex) for the purchase of crude oil, a commodity priced in United States dollars.
The situation puts their operations at risk and could lead to potential shutdowns.
With 25 licensed modular refineries across Nigeria, boasting a combined capacity of producing 200,000 barrels of crude oil daily, these facilities play a crucial role in refining petroleum products for domestic consumption.
However, the worsening foreign exchange crisis in the country has made it increasingly difficult for the operational modular refineries to procure crude oil.
The current global benchmark for crude oil, Brent, trading at over $80 per barrel, underscores the urgency of the situation.
Despite their significant refining potential, the modular refineries are struggling to access the necessary foreign currency to purchase crude oil, which is priced in dollars.
The Crude Oil Refinery Owners Association of Nigeria has highlighted the challenges faced by modular refinery operators.
They assert that the scarcity of dollars has made it nearly impossible to procure crude oil, resulting in a domino effect where refined products cannot be supplied to oil marketers for distribution.
Eche Idoko, the association’s Publicity Secretary, emphasized that unless a solution is found, modular refineries may be forced to cease operations.
He called attention to the need for crude oil to be sold in naira, a move that could ease pressure on the currency and make diesel more affordable.
The threat to modular refineries not only jeopardizes the country’s petroleum production capacity but also underscores the broader economic challenges facing Nigeria amidst the ongoing forex crisis.
Nigerian Bureau De Change Operators Weigh Merger Options Amidst CBN Regulations
As the Central Bank of Nigeria (CBN) proposes new regulatory guidelines for Bureau De Change (BDC) operators, Nigerian currency traders are contemplating mergers as a potential strategy to navigate the evolving regulatory landscape.
The proposed guidelines, outlined in a draft paper titled ‘Revised Regulatory And Supervisory Guidelines For Bureau De Change Operations In Nigeria,’ suggest significant increases in capital requirements for BDC operators, including a jump in share capital to N2 billion for Tier 1 licenses and N500 million for Tier 2 licenses.
Aminu Gwadebe, President of the Association of Bureau De Change of Nigeria (ABCON), highlighted the potential for consolidation within the industry as members grapple with the proposed regulatory changes.
Gwadebe explained the need for a temporary halt on issuing new licenses to allow existing operators to merge and form consolidated entities capable of meeting the stringent capital requirements.
Speaking with media Gwadebe noted that the proposed cautionary deposits, amounting to N200 million for Tier 1 and N50 million for Tier 2 licenses, were not in line with global practices for BDC operations.
He stressed the need for dialogue and review of the proposed figures, asserting that such high deposit requirements were unprecedented in the industry.
In anticipation of the CBN’s finalization of the regulatory guidelines, BDC operators are exploring various options to bolster their capital base.
Some operators have begun discussions about potential mergers to pool resources and meet the proposed capital thresholds, recognizing the challenges of raising substantial capital individually within a short timeframe.
As the regulatory landscape evolves, BDC operators are keenly observing developments and engaging in strategic deliberations to ensure compliance with regulatory requirements while sustaining their operations in Nigeria’s dynamic financial environment.
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