Naira Devalues Big Time, CBN Runs After Against FX Whales

BREAKING: CBN Officially Unifies All Exchange Rate Windows

The Central Bank of Nigeria (CBN) went all out against foreign exchange (FX) whales affecting the direction of local currency exchange rates, which dealt a serious blow to the value of the Nigerian naira in the foreign exchange markets.

Due to a persistent lack of foreign exchange in the economy, the naira passed a fresh red line in the official window and traded close to N1700 versus the US dollar, which was the dominant currency.

According to data gathered from the FMDQ platform, the forward rate reached its top on Friday during the intraday trading session at N1805. At the low band, the forward rate was quoted at N1301, and the value of US dollars transacted at the autonomous FX window printed at $151.93.

Data from the FMDQ platform which displays daily exchange revealed that the naira depreciated to N1,665.50 per US dollar on Friday. Similarly, in the parallel market, the Naira weakened against the US dollar to close at N1,830.

In several discussions with economists and investment bankers, MarketForces Africa gathered government policies have been frustrated by FX whales – individuals, and financial services companies among others with abilities to manipulate exchange rate directions.

The apex bank and securities agencies have started tracking FX movements, especially transactions conducted by currency traders in the parallel markets segment. The CBN is combing all segments of the economy where foreign currency exchange hands to keep rates surge in check.

The CBN has launched FX market guidelines to stop the activities of saboteurs and forex speculators. In the latest development, CBN reviewed guidelines for Bureau de Change operations in Nigeria.

The apex bank has now categorised BDC operations into Tier 1 for those with a national presence, branches and franchises and Tier 2 operators are restricted to 1 state with max 3 locations.

To operate in the country, a minimum capital of N2 billion is required for Tier 1 currency traders in the unofficial marker and N500 million for Tier 2 class Bureau de Change.

In its new guideline targeted at stopping the activities of some FX whales, CBN said entities like banks, government agencies, NGOs others are no longer allowed to have ownership stakes in BDCs.

Also, BDCs can buy and sell foreign currencies, issue prepaid cards, serve as cash points for money transfer operators etc. However, operators are not allowed to take deposits, grant loans, deal in gold or engage in capital market activities.

It further stresses that BDCs can source forex from authorized dealers, travellers, hotels, and embassies while the apex bank requires operators to disclose sources for large transactions above $10,000.

Based on the new guideline, BDCs can sell forex for travel, medical bills, school fees etc. up to specified limits per customer annually in a non-cash pattern as the CBN mandates that at least 75% of the sale must be via transfer, and 25% can be cash.

CBN has also subjected BDCs operations to Anti-money laundering law with penalties, saying non-compliance may lead to sanctions including revocation of licence.

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