Access Bank: CBN suspends forex sales to BDCs over COVID-19

The Central Bank of Nigeria (CBN) has recently announced the suspension of forex sales to Bureau De Change (BDC) operators in response to the ongoing COVID-19 pandemic. This move comes as traders at Nigeria's forex market eagerly anticipate a bi-weekly retail forex auction scheduled for today. Femi Ogundimu, a Fixed Income Trader at Access Bank, provided insights into the current state of Nigeria's fixed income and FX markets amid the pandemic. Ogundimu highlighted the liquidity levels in the system, revealing that liquidity opened at 520 billion, up from 509 billion the previous day. This liquidity is influenced by rates in the market, and Ogundimu noted a decline from levels seen last week. The management market's current lack of support for buying back was also a notable factor impacting liquidity. Investors have shown increased interest in the T-bills and bond markets, with many directing their funds towards new bonds. The COVID-19 situation has led to a reduction in the bill market, prompting some investors to sell and driving bond prices higher. Ogundimu mentioned that the Eurobond market has seen significant buying interest as investors seek higher yields. As the CBN prepares to conduct a retail S.M.I.S. auction, Ogundimu discussed the expected response from investors. He noted that the base rate for the auction may be adjusted to between 365 and 380, which could impact future demand. Despite uncertainties, the market is expected to participate in the auction. When asked about the impact of the CBN's compulsory holiday for BDC traders on the money markets, Ogundimu suggested that the effect may be minimal due to reduced demand for forex amid travel restrictions. The closure of borders and airports has limited currency demand, potentially influencing exchange rates. The decision to suspend forex sales to BDCs reflects the CBN's efforts to manage the economic challenges posed by the COVID-19 pandemic. As uncertainty looms, market participants are closely monitoring developments and adjusting their strategies to navigate the evolving financial landscape.