The Central Bank of Nigeria (CBN) last week stated that beyond the exclusion of funding for 41 items in the interbank forex market, the items cannot also be funded from proceeds of exports as well as the bureau de change (BDC) segment of the forex market.
The central bank issued the directive in a circular dated July 1, signed by its Director, Trade and Exchange Department, Mr. Olakanmi Gbadamosi, a copy of which was posted on its website.
It also warned authorised dealers to ensure that they comply with its earlier circular that excluded the items from the official forex market.
The CBN recently announced the restriction of importers of 41 items from accessing forex from the official foreign exchange market.
Some of these items include rice, wheel barrows, head pans, cement, margarine, palm kernel/vegetable oil, meat and processed meat products, vegetable and processed vegetable products, poultry, private airplanes/jets, Indian incense, toothpicks and canned fish in sauce (geisha/sardines), among others.
But the latest central bank circular said: “As stated in the circular, all the items on the attached schedule which have already been classified as ‘Not Valid for Forex’ cannot be funded at the interbank market, from proceeds of exports and BDC sources.
“Consequently, authorised dealers are enjoined to ensure that these items are funded from sources outside all sources of the Nigerian forex markets (interbank, export proceeds and BDCs).”
Furthermore, it reminded authorised dealers of the need to comply strictly with the requirements of its circular, which stated that “BDCs shall use the cash purchased for the transactions listed below, provided the invoices/demand notes for the payment do not exceed $5,000 or its equivalent in other foreign currencies per transaction”.
CBN listed the transactions under this category to include BTA/PTA, mortgage monthly payments, school fees abroad, credit card payments, utility bills and life insurance premium payments.
“It is therefore necessary to note that BDCs are only authorised to sell dollar cash of not more than $5,000 per each of these transactions. Under no circumstances shall an authorised dealer engage in wire transfer of funds on behalf of the BDC operator.
“For the avoidance of doubt, any authorised dealer that is found to have used funds from the interbank, export proceeds and BDCs to consummate these items listed as ‘not valid for forex’ or undertake money wire transfers for a BDC, shall be sanctioned appropriately,” it warned.
Ostensibly, the latest directive by the CBN, which has shied away from devaluing the naira, was done to reduce pressure on the informal or BDC segment of the forex market, where the local currency plunged yesterday as importers sought alternative sources for dollars after the central bank stopped foreign-currency funding for 41 items.
In the BDC market, the naira declined to N230 to the dollar from N226 last week, the President of the Association of Bureaus de Change of Nigeria, Aminu Gwadabe, told Bloomberg in an interview.
The currency traded at N215 per dollar last week before the new CBN restrictions, he said.
In interbank trading, the naira advanced 0.1 per cent to N198.85 per dollar in Lagos.
The restricted items account for as much as $6 billion of goods imported every quarter, according to Gwadabe. “The ban is putting pressure on naira on the streets,” he said.
Faced with a 45 per cent plunge since last year’s peak in the price of oil, the source of two-thirds of government revenue, the central bank began imposing currency restrictions as pressure mounted on the naira.
The nation’s foreign-currency reserves have declined 16 per cent this year to $29 billion while the naira has weakened by 18 per cent against the dollar