The Central Bank of Nigeria (CBN) has given the go-ahead for licensed Bureau De Change (BDC) operators to take part in the Nigerian Foreign Exchange Market (NFEM). This is part of the CBN’s attempts to make the retail segment of the market more liquid and fulfill the real demands of end users.
Channels TV says that the apex bank also agreed that each BDC’s weekly FX acquisitions should be limited to USD150,000 and that they should follow the BDC’s existing operating procedures when using the money.
The Director of the Trade and Exchange Department, Musa Nakorji, signed a circular that says that all BDCs that are properly licensed by the CBN can get foreign exchange through any Authorised Dealer Bank they want, at the current market rates.
The circular says that the move is meant to make the market more efficient and give more people access to foreign currencies throughout the economy.
But the CBN made the transactions follow stringent rules and control risk.
Before each FX sale, authorized dealers must do comprehensive Know-Your-Customer (KYC) and due diligence checks on BDC clients.
To make things more open and accountable, the CBN told all licensed BDCs that they had to send in timely and accurate electronic returns according to the rules that are already in place.
BDC’s are not allowed to keep FX positions bought from the NFEM, so any unused foreign exchange must be sold back to the market within 24 hours.
The circular also makes settlement methods more tight by requiring that all FX transactions take place through settlement accounts with approved financial institutions. You can’t do business with other people, and cash payments can only be up to 25% of the total amount of any transaction.
In general, the directive is in line with the CBN’s larger plan to strike a balance between allowing people to join the market and having strong regulatory monitoring. This will keep the foreign currency market liquid while also protecting the integrity of the financial system.
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