CBN Moves to Inject $418 Million to Oil Marketers and Others

As CBN vowed to supply  foreign exchange (FX) in the market, the Central Bank of Nigeria (CBN) last Friday auctioned US$418 million through retail-Special Secondary Market Intervention Sales (SMIS), at a marginal rate of N310/$.

The Acting Director, Corporate Communications, CBN, Mr. Isaac Okoroafor, in a statement on Sunday, said petroleum, airlines, agriculture and raw materials/machineries sub sectors benefitted from the auction.
The auction was in addition to the US$350 million sold as wholesale auction, Business Travel Allowance/Personal Travel Allowance (BTA/PTA) and school fees last week.
This is expected to strengthen the naira exchange rate in the coming days.
The naira closed at N405 to the dollar on the parallel market last Friday.
“In the weeks ahead, the CBN will sustain its intervention through the sale of foreign exchange to all segments of the market i.e. PTA/BTA, Wholesale SMIS, Retail SMIS and the BDC. The Bank will sell short tenured forwards of 7-30-day maturity to meet demand of manufacturers and all other foreign exchange users,” Okoroafor said.
He added: “These significant and consistent injection of foreign exchange into the market should reassure all foreign exchange users of our determination to continue to meet all legitimate FX demand in the market while striving to achieve exchange rate stability in the market.”
In a related development, directors of over 3,000 licenced Bureaux De Change (BDCs) firms will be meeting on Monday in Lagos, to decide on ways to force down dollar rates differential and narrow the gaps between official and parallel market rates.
The emergency meeting became exigent following last week’s sudden depreciation of the naira against dollar, which the operators said is against the interest of their operations and economy.
According to a statement on Sunday, the President, Association of Bureaux De Change Operators of Nigeria (ABCON) Aminu Gwadabe said the meeting with the theme: ‘Role of BDCs in Price Stability- Realities and Compliance’ will be used to warn erring BDC directors on the consequence of violating operating guidelines.
He said the BDCs would continue to support CBN’s exchange rate stability objectives and also ensure that official and parallel market rates convergence is achieved.
“We want BDC Directors to know the gains of price stability, rate harmonisation and regulatory compliance. Operators with infractions will face penalties. We did it in 2006 when the BDC window was first opened. We helped the CBN to narrow the huge gap between official and parallel market rates. We are ready to do it again,” he said.
Gwadade said the BDCs helped the CBN to narrow the exchange rate gap from N520 to present rate, and will continue to achieve better results as the CBN continues to fund BDCs with increased dollar allocations.
“We are ready to partner with the CBN to ensure there is rate convergence. We want to make the market transparent, accountable and secure for the economy, investors and Nigerians in Diaspora so that more dollars will be attracted into the economy to strengthen the local currency,” he said.
Gwadabe said the BDC directors are the owners of the business, and should understand that they carry corporate governance burden, and will directly face sanctions when their operations run contrary to CBN’s guidelines.
“We want the BDC directors to fully take charge of their businesses, because they will be punished if anything goes wrong. We also want the public to know that BDC operators are not criminals, but remain critical partners of the CBN in ensuring that price and exchange rate stability are achieved,” he said.
The ABCON boss said that BDCs’ capital is eroded anytime exchange rates go up, and naira is depreciated. “We suffer financial losses anytime the naira depreciates. We want a better and harmonised exchange rate,” he said.
He praised the CBN for selling $20,000 to each licenced BDC firms last week, adding that the funds would help to further strengthen the naira against the dollar.
“We expect that the $20,000 given to us will go a long way to douse the tension in the market even as we urge the CBN to continue to boost liquidity in the market,” he said.
He also urged the CBN to continue to take steps that would help bring more foreign investors to the economy.
Gwadabe said ABCON has a zero tolerance for non-compliance with regulatory requirement and unethical conduct amongst its members. The group, he said, created the office of Compliance Officer at its National Secretariat and in all its zonal offices and also provided vehicles for the compliance officers to regularly visit BDCs under their jurisdictions.

“BDCs are able to do more business when the exchange rate is stable and relatively close to the official exchange rate and so, will do everything within its powers to support CBN’s drive for exchange rate stability,” he said.
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