Last week it became clear that the Naira was gearing up for a new turn and now the Central Bank of Nigeria (CBN) wants to speed things up by selling the United States Dollar to FOREX dealers at a subsidised rate.

A letter from the CBN’s Trade and Exchange Department had told the President of the Association of Bureau De Change Operators on Monday, 25 March, that a selection of BDCs will have $10,000 sold to them at the rate of ₦1,251 and on their part, they must ensure not to sell beyond 1.5 per cent of the starting value dispensed to them, otherwise, that would be a breach.

We refer to our letter to you referenced TED/DIR/CON/GOM/001/071 in respect of the above subject wherein the CB approved a second tranche of sale of FX to eligible BDCs.

Please note that any BDC that breaches [the] above terms shall be [sanctioned] appropriately, including outright suspension from further participation in the sale, reads a part of the circular sent to the association and signed by the trade and exchange department’s director Hassan Mahmud.

Five days ago the Naira reached its most positive level of appreciation since its downward spiral. Last Thursday, the currency had been pegged at 1409.943 as the buying rate against the United States Dollar and analysts thought that was good.

ALSO READ: Naira seen to be closing the gap it formerly lost by reaching ₦1,400 to a dollar. Is that good enough?

But since the sales directive to the BDCs yesterday, there have been concerns about the Naira being propped up artificially by the CBN at the expense of its foreign reserve.

A personal finance expert Kalu Aja on the X platform tweeted a reply to the apex bank’s move.

By celebrating the “strong naira” via sale of FX to BDCs the message being sent Is that the nation is at a net positive inflow of fx (current account surplus). In effect, we are celebrating whitened fiscal sepulchres, which indeed appear beautiful outward, but are full of unproductive high-cost defence of the Naira, reads the tweet.

1. Is selling FX to BDCs legal? Yes

2. Are FX subsidies good? It's distorted but it's good for national development if done right

3 Is this sale of FX to BDC a new policy? No. CBNs in the past have defended the Naira by selling subsidized fx as well

4. Is the Naira floated?… pic.twitter.com/kYMcaWnRsK

— Kalu Aja (@FinPlanKaluAja1) March 26, 2024

Still, the controlled sales of the dollar to BDCs check with the mood of floating the Naira. Under a Willing Buyer, Willing Seller approach, there is room for the central bank to sell the USD at a rate cheaper than expected.

This is expected to drive competition and maybe inspire morals preaching modesty when making gains but it remains to be seen if that will truly sustain the strengthening of the Naira since last Thursday.

Ayodele Johnson

Ayodelé is a Lagos-based journalist and the Content and Editorial Coordinator at Meiza. All around the megacity, I am steering diverse lifestyle magazine audiences with ingenious hacks and insights that spur fast, informed decisions in their busy lives.