July 2021 MPC Meeting: CBN Holds All Policy Parameters, Stops Sales of FX to BDCs

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Tuesday, July 27, 2021   /05:28 PM / by Proshare Research/Header Image Credit: VON

 

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has today concluded its two-day meeting in July 2021.

 At the end of the meeting, the committee resolved to hold the monetary policy rate and all other policy parameters constant.

 The decisions reached are as follows:

  • The benchmark interest rate (MPR) retained at 11.50%
  • The asymmetric corridor remained at to +100/-700 bps around the MPR
  • The cash reserve ratio retained at 27.50%; and
  • The Liquidity Ratio retained at 30.00%

Just as the CBN Governor concluded his statement on the outcome of the July 2021 MPC meeting, he made a further statement and announced major changes relating to the foreign exchange market.

 

The CBN decided to:

1. No longer sell foreign exchange to bureau de change operators (BDCs).

 

2. No longer issue fresh licences to BDCs.

 

3. The governor said that the central bank sells about $110 million to BDCs every week. Going forward, those funds will be made available to commercial banks to meet genuine demand for foreign exchange.

 

4. Going forward, banks will reorganise their operators to cater to customers who use to patronise BDCs.

 

5. Banks must make every effort to meet genuine demand as soon as possible while those who are not able to access FX can report to the CBN via its official contact details

 

With this move, the CBN seeks to reign in speculative demand for foreign exchange and take on the challenge of meeting all genuine demand.

 

It will be recalled that the CBN stopped the sale of FX to BDCs until further notice during the outbreak of the coronavirus in March 2020 while similar action was also taken in 2016.

 

Proshare commentary on the CBN announcement on changes to the FX market to follow...

 

Related Links

1.      CBN Stops Sale of FX to BDCs, Holds Policy Parameters Constant - July 27, 2021

2.     CBN Suspends FX Sales to BDCs Until Further Notice  - Mar 26, 2020

3.     CBN FX Sales ban to BDCs:financial and market players react - Jan 12, 2016


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