Can Nigeria sustain FX sale to BDCs?

The Central Bank of Nigeria has resumed dollar sales to BDC operators with 10,000 dollars disbursed at the rate of 1,021 per dollar, signaling an effort to stabilize the foreign exchange market. This move comes as over 300 accounts linked to illicit foreign exchange trading have been frozen by the Economic and Financial Crimes Commission. Dipo Ajayi, Heads, Fixed Income and FX at Chapel Hill Denham Securities, joined CNBC Africa for a discussion on the sustainability of these measures. Ajayi acknowledged the currency retracement that occurred recently, attributing it to the lack of supply from the central bank to the BDC windows. The recent activities in the market, including the fluctuation in the value of the Naira, have raised questions about the future stability of the currency. However, Ajayi emphasized that retracements are common in any asset class and highlighted the need for strong policies to address the challenges. Despite the recent fluctuations, Ajayi remained optimistic about the market's outlook, citing the central bank's efforts to attract foreign investors and the potential for increased inflows. He noted that the elevated rates and aggressive selling in the equities market could create an attractive environment for investors. Ajayi also discussed the impact of the central bank's FX sales to BDC operators and the Association of Broad Exchange Operators' recommendation to ban non-export domiciliary account holders from accessing FX from the official window. While acknowledging the concerns raised by the association, Ajayi suggested that the central bank would focus on maintaining the current FX framework to stabilize the market. In addition to the FX sales, Ajayi also touched on the proposed issuance of dollar-denominated domestic bonds and the expected financing package from the World Bank, highlighting these as positive developments for Nigeria's economic outlook. The interview concluded with Ajayi pointing out the central bank's efforts to address speculations and ensure genuine demand in the market, signaling a balanced approach to managing the currency challenges. Overall, the discussion shed light on the complexities of Nigeria's currency market and the various factors influencing its stability.