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CBN Stops Sale of FX to BDCs, Policy Parameters Remain Constant



In a move that took local Nigerian financial markets by surprise, the Central Bank of Nigeria (CBN) embarked on sweeping measures to clean the rot that had allegedly occurred in the trading of foreign exchange at Bureau de Changes (BDCs). The CBN alleged that the BDCs had abused the regular sales of foreign exchange to them by selling FX at rates above the agreed guidelines, thereby engaging in what the regulator called ‘rent seeking’.

At a press briefing held onTuesday,, the CBN Governor stated that the CBN would also no longer approve BDC licence applications. The decision reached by the MPC was premised on the committee’s observation that the BDCs had, contrary to their mandate, become wholesale dealers conducting large FX transactions above their sales limit of $5000 per person and instead concluded single transactions worth millions of dollars.

Godwin Emefiele, noted that there had been an astronomical rise in operators who now number 5,689 as of June 2021 a significant rise from 74 dealers in 2005. He further noted that the regulator received an average BDC application of 500 monthly. The CBN boss said that BDC operators disregarded prevailing rates and spurred the gradual dollarization of the domestic economy.

According to the Governor, Before the Bank’s decision, the CBN sold $20,000 weekly to over 5,000 BDCs amounting to over US$100m weekly and US$1.57bn annually. In a bid to reduce the pressure on the country’s FX,  the CBN Governor directed all commercial banks to set up FX Teller points in all branches to ensure the direct sale of FX to buyers.

Rethinking Multiple Exchange Rates

Past governments have sought to respond to Nigeria’s balance of payments challenge by creating a legal parallel (or dual) foreign exchange market to avoid the short-term effects of a depreciation of the Naira on domestic prices while retaining some degree of control over capital outflows and international reserves.

BDC operators constitute a parallel market. Over the last few months, the BDC rates have hovered between $472.4 and $500 in January, while the official rate has surged between $381 and $411.27 implying a premium gap of 28% (see chart 1 below).


Chart 1: Comparative Average Movement of I&E FX and BDC Rates 2021

Source: CBN, Proshare Research

Analysts believe that this is unsustainably high and capable of disincentivizing foreign investment, underscoring the CBN’s move to stop the weekly allocation of FX to BDCs.

Policy Levers are Unchanged

Meanwhile, the MPC decided to again hold policy parameters constant considering the recent inflation figure (17.75%) – the third straight fall- the MPC expressed optimism that the inflation rate would continue downward trend but since it remains in the upper double-digits the banking sector regulator decided to hold policy rates fixed at the previous rates:

  • Monetary Policy Rate (MPR) – 11.50%
  • Asymmetric corridor around the MPR – +100/-700bps
  • Cash Reserve Ratio – 27.50%
  • Liquidity Ratio – 30.00%

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Senate Confirms Nomination of Yemi Cardoso as CBN Governor



By Elizabeth Okwe and Ojone Grace Odaudu

The Senate on Tuesday confirmed the nomination of Dr Olayemi Michael Cardoso as the Governor of the Central Bank of Nigeria, CBN.

This is as questions are being raised as to the legal status of suspended CBN Governor Godwin Emefiele whose sack or resignation hasn’t been confirmed by the Federal Government.

According to the CBN Act, the President requires the endorsement of 2/3 majority of the Nigerian Senate to remove the Governor. There are other conditions that may lead to his removal, none of which has been established.

Cardoso was screened alongside four nominees for the positions of CBN Deputy Governors, to steer affairs of the apex bank in the next five years.

The deputy governors include: Mrs. Emem Nnana Usoro, Mr. Muhammad Sani Abdullahi Dattijo, Mr. Philip Ikeazor, and Dr. Bala M. Bello.

Recall that last week, Cardoso resumed as the CBN governor in an acting capacity pending his screening and expected confirmation by the Senate.

Meanwhile, the Senate has also scheduled the screening of two additional ministerial nominees by President Bola Tinubu for Tuesday, October 3, 2023.

The President, while the National Assembly was on break, appointed the duo of Dr. Jamila Ibrahim and Ayodele Olawande as Minister of Youths and Minister of State for Youths respectively.

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Cost of Living: Kogi, Lagos and Rivers Dwarf Other States in NBS Report



By Elizabeth Okwe

The Nigeria Bureau of Statistics (NBS) has revealed that Kogi, Lagos, and Rivers are the most expensive states to live in, based on inflation rates for August 2023.

In its latest Consumer Price Index data released on Friday, the NBS said on a year-on-year basis, Kogi led the way with the highest all-items inflation rate at 31.50 per cent, followed closely by Lagos at 29.17 per cent and Rivers at 29.06 per cent.

In contrast, Sokoto recorded 20.91 per cent, Borno 21.77 per cent, and Nasarawa 22.25 per cent, recorded the slowest rise in headline inflation on a year-on-year basis.
When examined on a month-on-month basis, the trend continued, with August 2023 seeing the highest increases in Kwara at 6.07 per cent, Osun at 4.36 per cent, and Kogi at 4.35 per cent.

While Sokoto recorded 1.38 per cent, Borno at 1.73 per cent, and Ogun at 1.89 per cent recorded the slowest rise in month-on-month inflation.
Specifically for food inflation, the figures for August 2023 showed a similar pattern, with Kogi again taking the lead with the highest year-on-year basis food inflation rate at 38.84 per cent. Lagos followed closely at 36.04 per cent, and Kwara at 35.33 per cent.
On the other hand, Sokoto 20.09 per cent, Nasarawa 24.35 per cent, and Jigawa 24.53 per cent recorded the slowest rise in food inflation on a year-on-year basis.

On a month-on-month basis for the same period, Rivers at 7.12 per cent, Kwara at 5.89 per cent, and Kogi at 5.80per cent recorded the highest increases, while Sokoto recorded 0.50 per cent, Abuja at 1.30 per cent, and Niger at 1.40 per cent experienced the slowest rise in food inflation.
The report noted that the surge in food inflation can be attributed to the significant price hikes in various essential food items, including oil and fat, bread and cereals, fish, fruit, meat, vegetables, potatoes, yam, and other tubers, vegetables, milk, cheese, and eggs.

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Tinubu Nominates Olayemi Cardoso to Replace Emefiele as CBN Governor




By Elizabeth Okwe and Ojone Grace Odaudu

President Bola Tinubu has nominated Dr. Olayemi Michael Cardoso to serve as the new Governor of the Central Bank of Nigeria (CBN), for a term of five (5) years at the first instance, pending his confirmation by the Nigerian Senate.

A statement issued on Friday by Special Adviser to the President on Media and Publicity, Ajuri Ngelale, said the directive is in conformity with Section 8 (1) of the Central Bank of Nigeria Act, 2007, which vests in the President of the Federal Republic of Nigeria, the authority to appoint the Governor and Four (4) Deputy Governors for the Central Bank of Nigeria (CBN), subject to confirmation by the Senate of the Federal Republic of Nigeria.

Currently Chairman of the Board of Directors of Citibank Nigeria, Dr Yemi Cardoso is a financial and development expert with over thirty years’ experience in the private, public and not-for-profit sectors.

Furthermore, President Bola Tinubu has approved the nomination of four new Deputy Governors of the Central Bank of Nigeria (CBN), for a term of five (5) years at the first instance, pending their confirmation by the Nigerian Senate, as listed below:

(1) Mrs. Emem Nnana Usoro

(2) Mr. Muhammad Sani Abdullahi Dattijo

(3) Mr. Philip Ikeazor

(4) Dr. Bala M. Bello

“In line with President Bola Tinubu’s Renewed Hope agenda, the President expects the above listed nominees to successfully implement critical reforms at the Central Bank of Nigeria, which will enhance the confidence of Nigerians and international partners in the restructuring of the Nigerian economy toward sustainable growth and prosperity for all”, the statement added.

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