Governor of the Central Bank of Nigeria (CBN),Mr Godwin Emefiele has announced the stoppage of the sale of foreign exchange to licensed Bureau De Change (BDC) in the country. He said that “the management of the Central Bank of Nigeria has reached a decision, which takes immediate effect. The Bank would henceforth discontinue its sales of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws.”
Moreover, the CBN also permitted“commercial banks in the country begin accepting cash deposits of foreign exchange from their customers.”
He disclosed this yesterday, January 11, 2016, in a press statement entitled“Foreign Exchange Deposits in Commercial Banks and Sale to BDCs”. He said that the apex bank cannot continue to bear the financial burden being placed on the Bank and its limited foreign exchange in providing forex to the BDCs. “The CBN sells US$60,000 to each BDC per week. This amount translates to US$167 million per week, and about US$8.6 billion per year. In order to curtail this reserve depletion, we have reduced the amount of weekly sales to US$10,000 per BDC, which translates into US$28.4 million depletion of the foreign reserve per week and US$1.476 billion per annum. This is a huge hemorrhage on our scarce foreign exchange reserves, and cannot continue.”The CBN accused the BDCs of serving as a conduit for illicit trade and financial flows.
According to him,these decisions were to enable the CBN to continue to strive to attain its mandates as set out in the CBN Act of 2007 in view of recent developments in the forex market, which were brought about by the over 70 percent drop in the price of crude oil that contributes the largest share of our Foreign Exchange Reserves.
Emefiele observed that BDCs operators have abandoned their original objective of their establishment, which was to serve retail end users who need US$5,000 or less. Instead, they have become wholesale dealers in foreign exchange to the tune of millions of dollars per transaction.Thereafter, they use fake documentations like passport numbers, BVNs, boarding passes, and flight tickets to render weekly returns to the CBN. Despite the fact that Nigeria is the only country in the world where the Central Bank sells dollars directly to BDCs, operators in this segment have not reciprocated the Bank’s gesture to help maintain stability in the market.
“Whereas the Bank has continued to sell US Dollars at about N197 per dollar to these operators, they have in turned become greedy in their sales to ordinary Nigerians, with selling rates of as high as N250 per dollar. Given this rent-seeking behaviour, it is not surprising that since the CBN began to sell foreign exchange to BDCs, the number of operators has risen from a mere 74 in 2005 to 2,786 BDCs today. In addition, the CBN receives close to 150 new applications for BDC licenses every month.
“Rather than help to achieve the laudable objectives for which they were licensed, the Bank has noted the following unintended outcomes: Avalanche of rent-seeking operators only interested in widening margins and profits from the foreign exchange market, regardless of prevailing official and interbank rates; Potential financing of unauthorized transactions with foreign exchange procured from the CBN; gradual dollarization of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative,” Emefiele said.
By Dike Onwuamaeze