CBN releases new guidelines for forex sale - Proshare

July 2016
As the Central Bank of Nigeria made good its promise to implement the liberalisation of the foreign exchange market this week, it has gone further to release new guidelines for the sale of forex to both classes of Bureau de Change operators.

The new reforms have started having effect on the market, especially the parallel segment, as dealers believe there will soon be an influx of forex.

In a circular referenced TED/FEM/FPC/GEN/01/111 and dated July 9, 2009, the apex bank said it would resume the direct foreign exchange (cash) sales to Class 'B' BDC operators with effect from Monday July 13, 2009 subject to the following conditions that all Class 'B' BDCs had valid operating licence as well as the payment of caution deposit of $20,000.00 which would be deposited in a non-interest bearing account with the CBN. The circular signed by the acting Director, Trade and exchange Department, CBN, Mr. Batari Musa, also advised that the BDCs should instruct their bankers to indicate their names on the transfer message and that the commission arising from the transfer should be borne by the BDC and not the CBN.

According to the circular, "The market days for Classes 'A' (bank and non-bank) and 'B' BDCs shall be Tuesdays and Wednesdays every week, respectively.

The banks' Class 'A' BDCs should, however, at the Wholesale Dutch Auction Sale of Mondays indicate their intention to purchase foreign exchange (cash).

"Class 'B' BDCs must ensure that the naira equivalent of foreign exchange purchases are transferred to the CBN branch nearest to them on or before Monday through, while Class 'A' BDCs must ensure that their current accounts with the CBN are fully funded."

The guidelines also revealed that the maximum cash disbursement to each Class 'B' BDC should be $100,000.00 per week while for all Class 'A' BDCs, it should be a maximum of $1m per week. It, however, added that the CBN reserved the right to sell less.

It further stated that the apex bank should disburse foreign exchange (cash) to BDCs at the clearing rate of the immediate past WDAS session and all that BDCs were required to sell at no more than two per cent spread above the CBN selling rate.

The circular also added that, "Furthermore, the minimum paid up capital for Class 'A' BDC has been reviewed downward from N500m to N250m with effect from July 7, 2009. Consequently, Class 'A' BDCs that had earlier paid N500m but yet to obtain final licence are entitled to a refund of N250m upon application to the Director, Other Financial Institutions Department, CBN, Lagos or Abuja."

"For the avoidance of doubt, both Classes 'A' & 'B' BDCs are required to promptly render daily returns on the utilisation of cash disbursed to them as failure to do so will result to imposition of appropriate sanction. The provisions of this circular supersede the provisions of section (1) of the circular ref: "TED/FEM/FPC/GEN/01/027 of February 27, 2009 on Operational Guidelines for Class 'A' Bureau de Change Operators."

Meanwhile, forex dealers at the parallel market said on Monday that the naira appreciated steadily in anticipation of the forex liberalisation promised by the CBN.

Speaking with our correspondent, one of the dealers, said on the condituion of anonymity that the local currency appreciated from N159 last week to N157.

He said, "The naira has been appreciating and from the look of things there can be no other reason for that other than the new reforms put in place by the CBN. As at today (Monday), the naira exchange for N157 to the dollar from the N159 it exchanged for last week. What I don't know is the ability of the CBN governor to sustain the situation."

The local currency also exchanged for N146.1 at the CBN auction on Monday.

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Steven Rich
Sep 17, 2018:
Well done
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