Naira strengthens as CBN’s forex policy boosts investor confidence–BDC operators

The recent appreciation of the naira against the dollar has been attributed to the Central Bank of Nigeria’s (CBN) revised policy, which allows authorized dealers to sell foreign exchange directly to licensed Bureau De Change (BDC) operators.

This policy shift has increased forex inflow, improved investor confidence, and bolstered liquidity in the interbank market.

The CBN introduced the revised forex guideline in December 2024 to enhance market efficiency and ensure that the naira reflects its true value.

However, BDC operators initially faced challenges due to banks’ reluctance to implement the policy. Following appeals, the CBN extended the deadline for weekly forex purchases to May 30, 2025, allowing banks more time to fully comply.

President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, confirmed that banks have now started implementing the directive, leading to a more stable naira.

He noted that the naira strengthened to about N1,555/$1 on Thursday, February 13, and further appreciated to N1,540/$1 on Friday.

“The CBN circular has had a significant impact. Many banks have begun implementing direct forex sales to licensed BDCs, which is why we are seeing these improvements in the market,” Gwadebe said.

Explaining the circular, Gwadebe highlighted that BDCs have multiple forex sources, including CBN interventions and interbank inflows. Banks, acting as custodians of forex, are mandated to distribute some of their inflows—such as remittances and export proceeds—to BDCs at prevailing market rates.

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“During former CBN Governor Sanusi’s tenure, this system was in place. When the CBN withdrew its direct intervention, it directed banks to supply forex to BDCs from their inflows. The reactivation of this policy in February 2025 has provided a lifeline for the naira,” he added.

He further noted that increased investor confidence and rising portfolio investments have contributed to the stabilization of the currency. “Banks now have surplus forex, and they are offloading it into the market, which is helping to reduce volatility.”

Mallam Adamu, a BDC operator, stated that fluctuations in forex rates are normal, noting that the exchange rate moved from N1,570/$1 in the morning to N1,560/$1 later on Friday.

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“Sometimes, forex moves up and down. Many people are selling as much as they are buying. While CBN policies may be playing a role, I believe regular market forces are also at work,” he said.

Gwadebe also addressed concerns about speculation, panic buying, and currency substitution, which often exert pressure on the naira. He acknowledged that the Chinese Lunar New Year holiday had reduced forex demand from Nigerian importers but insisted that perception-driven speculation has a far greater impact.

“When people anticipate volatility, they engage in panic buying, which exerts more pressure on the naira than actual trade-related forex demand,” he explained.

In a bid to curb speculative activities, the CBN has issued new guidelines limiting currency traders to purchasing their weekly $25,000 forex allocation from a single authorized dealer bank. This restriction aims to enhance oversight and prevent arbitrage. BDCs found violating this rule will face sanctions.

Additionally, participation in forex purchases is now subject to the new capitalization requirements introduced by the CBN in May 2024—N500 million for Tier-2 operators and N2 billion for Tier-1 operators.