The exchange rate between the naira and dollar depreciated to N525/$1 on Wednesday, 24 hours after the central bank banned BDCs from selling forex.

In an apparent sign of panic for the greenback, demand has arisen across the two major segments of the parallel market. The parallel market is currently operated on the streets and over wired transfers. On the streets, black market operators sell for N525/$1 while over wires it sells for up to N530/$1. On investment apps used to purchase forex in the United States, rates have remained flat at N513/$1.

Why the panic?

Black market operators who spoke to Nairametrics on the condition of anonymity explained that the depreciation is in reaction to the CBN announcement as demand rose to new levels throughout the day.

They opined that some of the demand is coming from Nigerians who just want to convert their naira holdings into dollars. Demand is also coming from Nigerians planning summer holidays and looking to quickly purchase dollars in the event that it keeps depreciating.

Despite the depreciation today, the greenback remains scarce as most sellers do not immediately have the dollars to sell.

The Central Bank insists all dollar demands for school fees and personal and business travel allowances will be fulfilled via commercial banks.

Backstory

The central bank on Wednesday hit at the Bureau De Change (BDC) for illegal forex trading and announced it will discontinue the sale of forex to the Bureau operators in Nigeria.

The Central Bank also confirmed that they will no longer license new BDC operations in the country and have also halted all current processes for new licenses. The Governor, while making these announcements, promised to deal “ruthlessly” with Nigerian banks caught in these illegal acts.

According to the Governor, “in particular, we have noted with disappointment and great concern that our Bureau De Change operators have abandoned the origin objective for their establishment, which was to serve retail end users who need $5,000 or less. Instead, they have become wholesale dealers, illegally in foreign exchange to the tune of millions of dollars per transaction.

Despite the fact, that Nigeria is the only country in the world today where a central bank sells dollars directly to the Bureau De Change operators, the Nigeria Bureaus De Change segment have not reciprocated the bank’s gesture to help maintain price stability in that market,” he stated.

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