The Central Bank of Nigeria (CBN) has approved the sale of Foreign Exchange (FX) to eligible Bureau De Change (BDC) operators to address the demand for invisible transactions. Each BDC will receive $20,000 at a rate of N1,450/$, which is the lower band of the trading rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) from the previous trading day.

This decision, announced in a circular dated July 18, 2024, by A.A. Mahdi on behalf of the CBN Director, Trade and Exchange Department, aims to inject additional liquidity into the market. The naira closed at N1,630 to the dollar in the parallel market yesterday, compared to N1,620 on Wednesday, and intra-day trading saw rates as high as N1,650 before the announcement helped it appreciate to N1,630/$1.

At the NAFEM window, the naira closed at N1,566.82 to the dollar, gaining N14.83 from the previous day’s rate of N1,581.65/$1. Daily transaction volumes surged by 152.54%, reaching $273.14 million from $108.16 million on Wednesday.

The CBN explained that the intervention is crucial due to ongoing market distortions, which have been widening the exchange rate premium. The move is part of broader FX market reforms aimed at achieving a market-determined exchange rate for the naira. BDCs are directed to sell FX to eligible end-users at a margin not exceeding 1.5% above the purchase rate from the CBN.

Additionally, the Finance (Amendment) Bill, 2024, proposes severe penalties for banks, including imprisonment of officials who fail to pay the windfall tax to the Federal Inland Revenue Service (FIRS). The bill, presented by Senate Leader Opeyemi Bamidele, seeks to amend the Finance Act, 2023, to impose a one-time windfall tax on foreign exchange gains realized by banks in their 2023 financial statements. This tax is intended to fund infrastructure development, education, healthcare, and public welfare initiatives under the current administration’s Renewed Hope agenda.