CBN’s Quarterly Forex Intervention Has Been Reduced By $930 Million

The Central Bank of Nigeria’s foreign exchange intervention in the economy fell by $930 million in the third quarter of 2021, to $4.03 billion from $4.96 billion in the previous quarter.
This was disclosed by the CBN in its report on forex supply for the third quarter of 2021.

Its intervention in the Investors & Exporters, SMEs, and invisible markets increased from $2.97 billion in Q2 to $3.3 billion in Q3, while interbank intervention increased from $540 million to $730 million.

According to the report, the CBN intervened in the Bureau de Change market for $1.43 billion in Q2, but there was no intervention in Q3.

The apex bank had stopped selling foreign exchange to BDC operators in July of last year.

Godwin Emefiele, Governor of the Central Bank of Nigeria, stated at one of the Monetary Policy Committee meetings that the MPC noted with disappointment and great concern that the BDCs had defeated their purpose of existence, which was to provide forex to retail users.

He claimed they had turned into wholesale and illegal dealers.

He stated that commercial banks would be monitored to provide forex for the legitimate use of Nigerians when announcing its decision to discontinue the sale of forex to them in July.

ABCON President, Alhaji Aminu Gwadabe, stated in a recent statement that the BDC subsector has been in a coma since the July 2021 MPC meeting, when the CBN suspended weekly dollar interventions to the BDCs.

He advised the CBN to de-risk BDC operations in order to provide operators with access to foreign exchange from autonomous sources in 2022 and beyond.

While BDCs are licensed to offer retail forex sales and over-the-counter forex transactions, he believes they also contribute to Nigeria’s economic development.

He stated that the BDCs, among other things, ensured order and confidence in the forex market by providing data for monetary policy and channels for CBN intervention in the retail forex market, as well as creating over 15,000 jobs.

Gwadabe stated that the BDCs subsector’s annual transaction volume of over N1 trillion was under threat, while massive capital investment was becoming redundant, gradually eroding, and winding down.

He advised that, just as the apex bank de-risked the agricultural sector by making it easier for farmers to access cheaper loans at single digit interest rates from banks, the BDCs’ operations could be de-risked to allow them to receive diaspora remittances through International Money Supply Operators and deepen foreign capital flows to the economy.

“ABCON understands the apex bank’s challenges due to dwindling foreign reserves, declining oil output and oil theft, COVID-19-induced economic pains, fiscal policy challenges, debt burden, and election spending, which make it difficult for the CBN to sustain weekly dollar interventions to BDCs,” he said.