Forex: CBN sold $13.5bn to BDCs in 2019

 

 

Tony Chukwunyem

 

 

T

he Central Bank of Nigeria (CBN) sold a cumulative sum of about $13.5 billion to the Bureaux De Change (BDC) segment of the foreign exchange market in 2019, data findings by New Telegraph have shown.

 

 

Although the apex bank is yet to release forex sales data for December last year, New Telegraph’s analysis of the economic reports released by the regulator from January to November 2019, indicates that it sold about $1.07 billion per month to BDCs.

 

For instance, in its economic report for November 2019 released last month, the CBN said it continued to intervene in the foreign exchange market to sustain improved liquidity and relative stability in the market.

 

 

According to the report, “Thus, a cumulative sum of $2.84 billion was sold by the bank to authorised dealers in November 2019,  compared with $3.17 billion supplied in October 2019. Interbank sales fell by 15.5 per cent to $0.11 billion, in contrast to the increase of 26.7 per cent in the preceding month. BDC sales and swaps transactions also fell by 0.6 per cent and 52.1 per cent to $1.07 billion and $0.62 billion, below the preceding month’s levels of $1.08 billion and $0.13 billion, respectively.”

This means that the CBN sold a total of $1.07 billion and $1.08 billion to BDCs in the months of November and October last year respectively.

 

Similarly, its economic report for the third quarter of 2019 stated: “A total of $10.11 billion was sold by the CBN to authorised dealers in the third quarter of 2019.

 

“Of the total, foreign exchange sales to the I&E window, swaps transaction, wholesale forwards intervention, SME intervention, sales to BDCs, interbank sales and SMIS intervention rose above their levels in the preceding quarter by 2,345.14 per cent, 36.1 per cent, 24.3 per cent, 12.5 per cent, 9.3 per cent, 6.9 per cent and 0.7 per cent, respectively, to $2.02 billion, $0.47 billion, $1.50 billion, $0.43 billion, $3.54 billion, $0.33 billion and $1.84 billion, respectively.”

 

In other words, the CBN sold a total of $3.54 billion to BDCs between July and September last year.

 

In addition, New Telegraph’s review of the apex bank’s economic reports between January and June 2019 showed that it cumulatively sold $3.64 billion and $3.24 billion to BDCs in the first and second quarters of last year respectively.

Specifically, in its economic report for Q1’ 19, the CBN said it sold more forex to authorised dealers, including BDC operators, between January and March, compared with the preceding quarter.

 

The report stated: “A total of $11.81 billion was sold by the CBN to authorised dealers in the first quarter of 2019. This represented 10.2 per cent increase above the level in the fourth quarter of 2018. Of the total, foreign exchange forwards disbursed at maturity was $2.30 billion (19.5 per cent); sales to BDCs, $3.64 billion (30.8 per cent); I&E window, $1.53 billion (13.0 per cent); interbank sales, $0.55 billion (4.6 per cent); swaps transactions, $1.14 billion (9.7 per cent); SMIS intervention, $1.40 billion (11.8 per cent); wholesale forwards intervention, $1.00 (8.4 per cent); and SME intervention, $0.26 (2.2 per cent).”

 

Also, according to CBN’s figures, total sales to BDCs for the months of April, May and June last year stood at $1.16 billion, $1.05 billion and $1.04 billion respectively.

 

Thus, the regulator sold a total of $12.57billion dollars to BDCs for the first 11 months of 2019.

The steady increase in forex sales to BDCs, especially in 2019, follows the CBN’s decision in November 2018 to step up dollar sales to that segment of the forex market as part of measures to address rising demand for forex during that period.

Indeed, in its “Annual Activity Report” for 2018, the CBN stated that: “The direct sale of foreign exchange to BDC’s continued in 2018. However, the bank increased the volume and frequency of its weekly sales to three times per week in May and subsequently to four times per week in November.

 

“This was to manage the demand pressure which emerged due to capital flight as the market reacted to normalization of rates by the US Federal Reserve, dwindling crude oil price levels and ensure exchange rate stability. Consequently, total sales to a BDC per week stood at $75,000.”

 

Information obtained from the CBN’s website shows that the number of licensed BDCs in the country stood at 5,097 as at September 30, 2019.

According to analysts, the CBN’s regular supply of dollars to the forex market has been mainly responsible for the stability of the naira against the greenback in the past two years. For instance, the naira has exchanged at an average of N360/$ in the BDC segment of the forex market in the last two years.

New Telegraph had recently reported that the CBN sold a total of $29.72 billion to authorised dealers between January and September 2019, compared with the $25.7 billion total forex sales made by the apex bank in 2018.

 

 

 

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