Naira gains as CBN begins special forex sales for Xmas

The naira has made some gain against the dollar after the Central Bank of Nigeria (CBN) began a special $15,000 disbursement to Bureau de change (BDC) operators for the Yuletide. It sold at the weekend for N366 to a dollar at the parallel market. It was N376 dollar before the intervention, writes COLLINS NWEZE.

A Policy shift at the Central Bank of Nigeria (CBN) has brought reprieve to the troubled naira. The currency remained fairly resilient last week as the CBN injected $210 million into the inter-bank foreign exchange (forex) market to provide liquidity and stability.

In the parallel market, the naira appreciated by 1.1 per cent from N370.00/$1.00, gaining N4  to close the week at N366.00/US$1.

Analysts believed the showing followed the CBN’s special intervention in the Bureaux De Change  (BDC) segment of the market on Thursday.

The $15,000 weekly Yuletide special intervention forex sales to BDC operators begins tomorrow.

In a statement, CBN Director, CBN Trade & Exchange Department U. Abdullahi explained that with the approach of  the Yuletide and the resultant increase in the demand for Personal/Business Travel Allowances, the apex bank has in addition to the existing market days, Monday, Wednesday and Friday, introduced a special intervention day on Thursday.

“Consequently, all BDCs should note that the cut-off time for receiving naira deposits into their respective bank accounts for the Thursday’s special intervention shall be 10am on the Thursday. All operators are hereby advised to ensure strict compliance with the provisions of the extant regulations on the disbursement of forex cash to their respective customers as any case of infraction will be appropriately sanctioned,”  Abdullahi said.

Authorised dealers in the wholesale segment of the market, in Monday’s sales, received $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments were allocated $55million each.

CBN Director in charge of Corporate Communications Department Isaac Okorafor, while confirming the figures, restated the bank’s resolve to meet genuine customers’ request in the various segments of the market especially in the preceding period of the Yuletide and in the New Year.

At the Annual Bankers’ Dinner in Lagos, CBN Governor Godwin Emefiele, warned speculators not to bet against the naira. Despite the uptick in the exchange rate last week, Emefiele said the bank had enough reserve to defend the naira.

On November 30, the Bank injected $331.22million in retail Secondary Market Intervention Sales (SMIS) and Chinese Yen CNY51.86 million in the spot and short-tenored forwards of the inter-bank foreign exchange market.

As at Tuesday, the naira continued to exchange at an average of N365/$1 in the BDC  segment  of the market.

Spot rate

Spot rate is the price quoted for immediate settlement on a commodity, a security or a currency. Contrastingly, the CBN spot rate shed 0.02 per cent (five kobo) to close at N306.85/$1.00 while in the Investors’ & Exporters’  (I&E) Forex Window the naira opened the week at N364.10/US$1 and lost N1.06 to close the week at 365.16/US$1.

“Inclusively, activity level in the I&E FX window dipped by 15 per cent week-on-week to US$1.3 billion from $1.4 billion in the prior week.  In the FMDQ OTC FX Futures Open Contract market, total subscriptions rose by 4.6 per cent week-on-week to $4.6 billion from $4.4 billion last week, with notable buying interest in the July 2019 contract. Next week, we expect sustained support from the CBN as the foreign reserves remain buoyant. As at 6th December, the Nigerian foreign reserves had increased by 1.0 per cent ($409.2 million) to $42.5 billion from $42 billion in the prior week, providing buffers for further interventions in the market,” analysts at Afrinvest said in an emailed report to investors.

 The BDC industry

At all times, the industry is a critical sector in economic development and wealth creation. Financial experts believe that a partnership between the BDC operators and the CBN is needed to achieve exchange rate stability and will enable the sector to contribute its quota to the gross domestic product (GDP).

According to Association of Bureau De Change Operation of Nigeira (ABCON) President Aminu Gwadabe,  the BDC industry was created by CBN to fill a critical gap in the retail segment of the forex market

The decision to sell dollars to them, he said was because they have the capacity to sap illegal currency traffickers and the continued depreciation of the naira in the parallel market.

The BDCs Gwadabe argued, could be strengthened to operate across the value chain of the retail forex sector; remittance and payment spaces as well as local and international travel insurance brokerage deals. This, he said, would help turn them into a booming industry that can employ millions.

The CBN and BDCs, he said, can also work together to get out of the forex crisis.

 ABCON co-ordination/digitisation agenda

According to Gwadabe, ABCON’s coordination journey of automation and digitilisation of BDC’s processes started in 2016 with the launch of its automation platform.

The project came with three layers and stages. First layer is on online real time registration of our members with a success rate of over 4,000 BDCs registered nationwide. This layer is to enable our members conduct their membership registration from any of their location without coming physically to ABCON Secretariat.

The second layer borders on automation of ABCON’s operational process, book keeping, issuance of receipt, preparation of accounts, balance sheets, ledgers and sales/purchase registers. The most important of this layer is the online real time rendition of returns to regulatory agencies.

“I am happy to inform this forum that this game changer is revolutionalising the BDCs sub-sector in Nigeria and we started a pilot test on June 20, this year, with 21 BDCs selected across all the zones in Nigeria,” he said.

Another important feature of this layer is the BDCs on boarding and integration of the Bank Verification Number (BVN) platform on the Nigerian Interbank Settlement Systems (NIBSS) portal for verification and validation of clients’ BVNs, which is a most vital requirement for forex sale.

“Of special note is also the integration of our platform to immigration platform for the verification of international passport. Already, we are in advance engagement with the Irish technology experts for the achievement of this idea. The final layer is the one that excites me a lot and has to do with a trading platform for BDCs in Nigeria. Our technical experts in India, Poland are in advance stage of completion for onward submission to the CBN,” he added.

Capacity building for operators

ABCON has for years been an active group in the financial services sector, concentrating more on the BDC segment of the market and ensuring that global best practices are followed in BDCs operations.

The association, has on its own, organised trainings for its members, and also partnered with the Nigerian Financial Intelligence Unit (NFIU)and the Economic and Financial Crimes Commission to build capacity for operators. BDC operators have been trained on how they can tackles money laundering, terrorist financing and the benefits of keeping records of their transactions.

“The NFIU/ABCON goal is to ensure that BDCs are not used to launder funds by Politically Exposed Persons (PEPs) especially at this period of electioneering. Their target is also to upscale BDCs’ compliance with the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Banks and Other Financial Institutions in Nigeria, Regulations 2013,” Gwadabe stated.

According to Gwadabe, the BDCs have over the years remained a potent monetary policy tool for exchange rate stability. They have helped the government in creating over 30,000 jobs for Nigerians, thereby reducing the unemployment rate. The BDCs, he said, would continue to make forex available to the critical retail end users in order to deepen access.

The BDCs have also been enhancing price discovery and transparency in the forex market. The operations of BDCs have equally raised the level of investors’ confidence and Diaspora remittances.