Will CBN's FX sales to BDC spur liquidity?

The Association of Bureau de Change Operators of Nigeria (ABCON) President, Aminu Gwadabe, recently discussed the decision of the Central Bank of Nigeria (CBN) to extend the Foreign Exchange sale period, highlighting the positive impact on the FX market. Gwadabe emphasized the importance of banks adhering to CBN directives to enhance liquidity in the market. The extension of the sale period until May 30 aims to stabilize the FX market and curb volatility, ultimately lowering exchange rates. Gwadabe commended the CBN for the extension, noting that it has already had a positive effect on market perception, with the exchange rate dropping to 1,485 Naira to the dollar. He highlighted the importance of reducing the gap between official and parallel market rates to promote transparency and discourage speculative trading. The measures implemented by the CBN, including the Foreign Exchange Special Operations, are contributing to market stability and lowering inflation rates. Gwadabe urged banks to embrace these initiatives and support efforts to improve market conditions. He emphasized the need for effective implementation of CBN policies to ensure a sustainable and balanced FX market. Additionally, Gwadabe provided an update on the recapitalization exercise for BDCs, expressing concerns over the size of the requirement. He requested a review of the 500 million Naira capitalization amount, citing the unique nature of BDC operations compared to other financial institutions. While acknowledging the importance of corporate governance and financial stability, Gwadabe highlighted the challenges faced by smaller BDCs in meeting the capitalization threshold. He shared insights into strategies being explored, such as mergers and the formation of public limited companies, to enhance compliance and promote long-term sustainability within the sector. Overall, Gwadabe stressed the need for a balanced approach that considers the diverse needs of BDCs while aligning with regulatory objectives for a robust financial market in Nigeria.