CBN updates BDCs’ list as anxiety over flexible forex details rises
• Reserves down by $470m in three weeks to $26.5b
• Forex refund boosts liquidity to N203b ahead of transactions today
The Central Bank of Nigeria (CBN) has again updated its list of licensed Bureau De Change (BDC) operators, put at 2,998, even as expectations on the release of the modalities for the implementation of the flexible exchange rate policy rise.
There were concerns over the fate of BDCs in the flexible exchange rate policy, which details were yet to be unfolded.
However, the CBN Governor, Godwin Emefiele, ruled out the possibility of restoring funding to the segment that is beset with difficulties, especially at this time of dwindled forex earnings.
“The flexibility we are talking about would be worked out and the details would be provided in the coming days. BDCs actually are part of the foreign exchange, but I have not by any means said that they are going to be restored back to the official foreign exchange window. They will continue to operate at the autonomous market.
“For critical transactions, there are people who would want to import plants and equipment to produce goods for which raw materials are almost 100 per cent available locally.
“We will support such attempts by people to set factories, foreign direct investments or even local direct investment. So, if they want make these importations, we will look for opportunities to make incentives available for them to stimulate growth. This is basically for raw materials that have minimal foreign content, not those that are wholly imported,” he said.
Meanwhile, the stock of foreign exchange reserves lost about $470 million from May 3 to 23, before steadying at N26.5 billion, representing 1.7 per cent decline from the month’s opening figure
Although the latest data on the level of reserves is being awaited, it actually started the month at $26.97 billion, but due to interventions, particularly in the petroleum and manufacturing sectors, the reserves’ profile dipped.
From January to date, the nation’s reserves have lost $2.47 billion from $28.97 billion to $26.5 billion, representing 8.5 per cent decline.
Despite the resurging price of crude oil to $49.33 per barrel in the international market currently, the country has been projected to lose out because of low production, associated with militancy.
Relatedly, the financial market liquidity, which had remained mostly tight last week, got the needed boost on Friday, ahead of this week’s activities, as the refund of forex provisions by CBN to banks drove balances with to N202.5 billion.
Also in the week, liquidity dynamics drove the Open But Back (OBB) and Overnight rates, which settled at 4.8 per cent and 5.5 per cent at the end of the week, representing 3.7 per cent and 3.4 per cent decline week-on-week.
The week had started with N186 billion liquidity balance, higher than N144.1 billion it closed the previous weekend, but improved to N198.4 billion in the middle of the week.
It also declined to N156.6 billion on Thursday, as a total of N80 billion Open Market Operations and the weekly Cash Reserve Requirement maintenance impacted on system’s liquidity level.
At the treasury bills market, it was broadly driven by the decision of the Monetary Policy Committee, which retained key policy rates.
Market sentiment had remained bearish as investors traded cautiously ahead of the MPC communiqué, with average bills going for 10.7 per cent.
However, the sentiment turned bullish on Wednesday and Thursday following MPC’s announcement to retain benchmark rate at 12 per cent, with average treasury bills rate settling at 10 per cent at the weekend, against 8.5 per cent in the previous week.
“With the decision of the Apex Bank to keep key rates unchanged, we expect money market rates to remain determined by liquidity dynamics in the system,” analysts at Afrinvest said.
The foreign exchange market also had its fair share of the impact of the MPC meeting, where decisions were reached to introduce greater flexibility in the pricing of foreign exchange at the interbank market while retaining a small window to fund critical transactions.
“At the parallel/BDC segments however, the pressure on exchange rate remained elevated in the week, more so that the market awaits the CBN’s guidelines on the new forex workings at the interbank market,” the analysts said.
Consequently, the Naira depreciated by 1.4 per cent week-on-week at the parallel market after closing at N351/$, against the previous week’s close of N346/$.
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