CBN crashes dollar rate with new sales to BDCs

The Central Bank of Nigeria (CBN) has announced continued dollar sales to Bureau De Change (BDC) operators, in a bid to further strengthen the naira.

The bank is offering $10,000 to each BDC at a significantly lower rate of 1101 naira per dollar, marking a drop from the previous rate of N1251 set two weeks ago.

This decision comes after the naira fell below N1600 to the dollar in the official market and an even steeper decline in the parallel market, where it plummeted to N1900 in February.

“Free-float exchange rate”

While Nigeria has faced prolonged shortage of foreign currency, the naira plummeted to historic lows after the central bank removed controls and allowed it to trade freely in a so-called floating model.

The currency declined from about N464 to a dollar at the official market last May when the new government came to power, to below N1600 weeks ago, driving inflation to a 28-year high of 31.7 percent.

The plunge has forced the CBN to reinstate controls with the resumption of dollar sales to currency exchangers.

The move has helped stabilize the currency, but analysts have raised concerns about the depletion of the nation’s foreign reserves in defence of the currency.

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The central bank said BDCs are to sell dollars at no more than 1.5 percent of purchase rate to users.

It said as of March 21, there were 1588 qualified BDCs. If the central bank were to sell $10,000 to all qualified exchangers, it would spend $15.9 million in this round of sales, further eroding reserves.