In its continuous efforts to shore up foreign reserves and stabilise the value of the naira, the Central Bank of Nigeria (CBN) on Tuesday discontinued the sale of foreign exchange to bureau de change (BDCs) on allegations of turning themselves into wholesale dealers instead of retail traders.
In the projection of CBN management and Monetary Policy Committee (MPC), foreign exchange transactions that should have come into the country through official channels thus shoring up reserves were being diverted to the parallel market by international organisations, embassies and development finance institutions operating in the country.
Nigeria had $33.8 billion in its foreign reserves as of July 22, 2021 up from $32.78 as of June 30, 2021.
At a press conference where he read the communique of the fourth meeting of Monetary Policy Committee (MPC), Governor of CBN, Mr Godwin Emefiele also announced the retention of Monetary Policy Rate (MPR) at 11.5 per cent along with all other parameters.
Emefiele said BDC operators engage in numerous and repeated financing of unauthorized transactions with foreign exchange procured from the CBN.
He stated that CBN sells $20,000 to over 5,500 BDCs per week.
“This amount translates to about $110 million per week and about $5.72 billion per year. “This is a scarce resource of central bank and the Nigerian government cannot continue to allow this unwholesome practice to continue in Nigeria.”
He accused BDC operators of becoming an avalanche of rent seeking operators only interested in widening margins and profits from the foreign exchange market regardless of prevailing rates. He added that they had also embarked upon “gradual dollarisation of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of the cashless policy.”
According to Emefiele, multiple BDCs are now promoted by single individual in order to illegally procure foreign exchange multiple times from the central bank. “Indeed, we have evidence that several international organisations, embassies regrettably and development finance institutions operating in the country patronise BDCs and illegal forex dealers to fund their local operations in flagrant contravention of our foreign laws and operations.
“Our bureau de change operators have abandoned the original objectives of their establishment which was to serve retail end users who need $5,000 or less.
“They have become somewhat greedy, recalcitrant with abnormally high profit from these sales while other Nigerians have been left to feel the pain. Given this rent seeking behaviour, it is not surprising that since CBN began to sell foreign exchange to BDCs, the number of operators has risen from a mere 74 in 2005 to over 2,700 in 2016 and almost 5,500 BDCs as at today.
“In addition, CBN constantly receives nothing less than 500 new applications for BDC licences every month.”
He disclosed that CBN had report that indicts development finance institutions, embassies and organisations that instead of selling their foreign exchange into the recognised importers and exporters’ window have resorted into operating with illegal forex dealers.
“And we will deal ruthlessly with Nigerian banks who have acted as collaborators with these illegal forex dealers because they have allowed their banking and payment system infrastructure to be used to facilitate these illegal deals.
“As for those foreign organisations, we will report them, to their regulators, we will write the organisations seeking their understanding and that if they insist in operating in Nigeria, they must go through the right channels to procure foreign exchange or procure naira for their domestic operations. “For avoidance of doubt, such transactions should have been done at I&E Window. These unintended outcomes have placed an unsustainable and enormous financial burden on the CBN and limited foreign exchange.”
Consequently, Emefiele said, CBN would henceforth discontinue the sale of foreign exchange to bureau de change operators; would no longer process or issue new licenses for BDC operations in the country. This stoppage extends to all licenses currently being processed regardless of the stage of that processing; would henceforth channel a significant portion of weekly allocations currently meant for BDCs to commercial banks to create legitimate FX demand for ordinary Nigerians and businesses whether for small scale imports, medical bills, educational expenditure, personal and business travel or any other legitimate needs as prescribed by CBN foreign exchange manual.
“All commercial banks in the country will with immediate effect create a dedicated teller point in designated branches for sale and disbursal of foreign exchange to customers who desire forex for legitimate purposes.”
Source: Nigerian Tribune
