The Central Bank of Nigeria (CBN) has extended the temporary access granted to Bureau de Change (BDC) operators for purchasing foreign exchange from the Nigerian Foreign Exchange Market (NFEM) until May 30, 2025. This decision aims to enhance market liquidity and support retail forex transactions.

Extension Announced via Circular

The extension was disclosed in a circular issued on Monday by the Trade and Exchange Department of the apex bank. The document, referenced TED/FEM/PUB/FPC/001/003, was signed by Dr. W. J. Kanya, the acting Director of the Trade & Exchange Department. It referenced an earlier directive, TED/FEM/PUB/FPC/001/030, issued on December 19, 2024, which initially permitted existing BDCs to source foreign exchange from authorised dealers.

The initial approval was set to expire on January 31, 2025, but has now been prolonged for another four months. Under this extension, BDCs can continue to purchase up to $25,000 per week from authorised dealers, with all previous terms and conditions remaining unchanged.

CBN’s Commitment to a Stable Forex Market

The CBN reiterated that the extension is part of its broader strategy to maintain a fully functional foreign exchange market, ensure liquidity, and meet the retail demand for eligible invisible transactions. It also assured stakeholders that the bank would provide liquidity whenever necessary to manage price volatility.

According to the circular, “We refer to our circular TED/FEM/PUB/FPC/001/030 dated December 19, 2024, which granted temporary access to existing BDCs to the NFEM for the purchase of FX from Authorised Dealers, subject to a weekly cap of USD25,000.00.

“The expiry date of January 31, 2025, which was granted in the above-mentioned circular, has been extended to May 30, 2025.

“All other terms and conditions in the above-mentioned circular remain unchanged. The CBN remains committed to a fully functional foreign exchange market and will continue to provide liquidity when necessary to manage price volatility.”

Decline in Nigeria’s Foreign Exchange Reserves

The extension comes amid a significant decline in Nigeria’s foreign exchange reserves, which dropped by $1.11 billion in January 2025. Data from the CBN revealed that the reserves stood at $40.88 billion on January 2 but had fallen to $39.77 billion by January 30, marking a 2.72% decline within one month.

The reduction in reserves is attributed to the CBN’s continued interventions in the forex market, external debt servicing, and capital outflows. While the naira saw a notable appreciation during the same period, the depletion of reserves suggests that the apex bank has been utilizing part of its forex stockpile to stabilize the currency and manage liquidity in the official market.

Regulatory Measures to Curb Forex Speculation

Over the past year, the CBN has implemented several policies aimed at regulating foreign exchange access and curbing speculative trading. These measures include stricter oversight of BDC operations, reinforced regulatory compliance, and reforms intended to unify exchange rates across different forex markets.

By extending BDCs’ access to forex, the CBN aims to sustain liquidity at the retail end of the market, ensuring that individuals and businesses can access forex for legitimate transactions. This move is expected to ease pressure on the parallel market and promote a more stable exchange rate environment.

Strategic Implications of the Extension

The latest extension highlights a cautious but strategic approach by the CBN in managing forex demand while maintaining overall market stability. The decision also reflects the central bank’s ongoing commitment to fostering a more transparent and efficient forex market in Nigeria.

As the new expiration date approaches, stakeholders will be closely monitoring market trends and assessing whether further interventions will be necessary to sustain forex availability and economic stability. The CBN’s next course of action will likely depend on economic indicators, including reserve levels, inflation trends, and the effectiveness of ongoing forex market policies.

For now, the extension provides a much-needed buffer for BDC operators, businesses, and individuals who rely on the forex market for international transactions, travel, and business expansion.