The Central Bank of Nigeria’s (CBN) decision to stop forex sales to Bureau De Change (BDC) operators has continued to attract reactions from stakeholders. Analysts insist that the decision was show of courage meant to bring efficiency and credibility to the forex market. COLLINS NWEZE reports.
THE Central Bank’s decision to stop dollar sales to Bureau de Change (BDCs) aimed at tackling abuses in the system has, expectedly, been eliciting mixed reactions.
While some commentators have responded to the policy from the perspective of the immediate shocks of the stoppage of sales of forex to the BDCs in the market and, are, therefore, advocating a return to the status quo, many are applauding the CBN’s stand given the wider long-term benefits of the ban on the economy.
According to a financial analyst, Emmanuel Onyebeke, no one expected that the reactions in the market would be jubilant given that the immediate shocks resulted in the fall in the unit of our local currency leading to the purchase of dollars at a higher rate, at the parallel market, within days of the introduction of the policy.
He said CBN’s aim to sell forex to BDCs was to make forex easily accessible to the end-users, halt the scarce forex, and shore up the naira exchange rate.
CBN figures showed that the number of the BDCs grew from 74 in 2005 to over 5,500 BDCs as of July 27, this year.
Onyebeke said were the quantum leap in the number of the BDCs (5,426 in 16 years) a reflection of real growth in that sector and in support of the attainment of the CBN targeted objectives, there wouldn’t have been any cause for alarm.
“Rather, from the reasons adduced by the CBN, the increase was informed by selfish interests and the perpetuation of illicit transactions which are antithetical to Nigeria’s socioeconomic growth and a negation of the nation’s apex bank monetary policy projections. For many years, the activities of some of the BDCs have continued to undermine genuine efforts at stabilising the currency which informed CBN’s commencement of weekly sales of forex to the BDCs operators. It is a known fact that the apex bank had been supplying each licensed BDCs upwards of $10,000 twice per week at the rate of N393 with a mandate to sell with a margin of N2,” he said.
“Instead of easing access to forex and enhancing the exchange rate of the Naira, the BDCs operators have engaged in round-tripping and hoarding of forex, thereby creating artificial scarcity to sell at higher than approved rates thus serving as conduit pipes for money laundering and indulging in many other illicit transactions not envisaged by the CBN.”
The negative implications of the compliance failures of the BDCs include but are not limited to the dollarisation of the economy, subversion of the cashless policy, common ownership of several BDCs by the same operators in the sector to obtain multiple forex from the CBN and continued patronage of illegal BDCs by international organisations and embassies.
These unwholesome activities were the build-up to the ban on sales of forex to the BDCs announced by the CBN Governor, Godwin Emefiele, after the Monetary Policy Committee (MPC) meeting, which was held on July 27, 2021. Some are of the opinion that it would have amounted to insensitivity had CBN turned blind eyes to these anomalous practices which have derailed the good intentions that informed the CBN regular sales of the forex to the multitude of BDCs at discounted rates.
Emefiele said: “Despite the fact that Nigeria is the only country in the world today 0where a central bank sells dollars directly to Bureau De Change operators, operators in the Nigerian Bureau De Change segment have not reciprocated the bank’s gesture to help maintain price stability in that market. Given this behaviour, it is not surprising that since the CBN began to sell foreign exchange to Bureau De Change, the number of operators has risen from a mere 74 in 2005 to over 2,700 in 2016 – and almost 5,500 BDCs as of today (July 27, 2021).
“In total disregard of the difficulty that the (apex) bank is facing in meeting its mandate of maintaining the country’s foreign exchange reserves to safeguard the value of the naira, we have continued to observe that stakeholders in some of the sub-sectors have not been helpful in this direction. In particular, we have noted with disappointment and great concerns that our Bureau De Change operators have abandoned the original objective of their establishment which was to serve retail end users who need $5,000 or less. Instead, they have become (illegal) wholesale dealers in foreign exchange to the tune of millions of dollars per transaction.”
The additional disclosure, by the CBN Governor, that the CBN constantly receives nothing less than 500 new applications for BDC licenses every month, indicates that there is more than meet the eye in the business of BDCs as currently operated in Nigeria.
Admitted that constructive criticisms are necessary for the shaping and re-shaping of policies, the unusual increase in the number of interests in securing BDC licences, as reported by the apex bank, should also be of interest to those opposing the recent ban of sales of forex to BDCs; aside from the players and their sponsors who have been benefiting from the ‘anomaly’.
Against this background, the change in CBN’s policy direction to sell forex to Deposit Money Banks (DMBs) and to retain them as forex retail outlets should be given a chance. And not a few have applauded the shift.
Other stakeholders contended that apart from halting the prevailing anomalies and illicit transactions in the BDCs, the policy would lead to saving the waste of scarce forex in funding the BDCs. With the recent decision, there appears a consensus that the apex bank has streamlined forex transactions and brought it under its control to enable it to monitor, achieve transparency, garner compliance to the regulatory framework, ensure accountability on sales of forex as well as achieve financial stability.
Former President, Association National Accountants of Nigeria (ANAN), Sam Nzekwe and a university don and capital market expert, Prof. Uche Uwaleke, among other pro-ban advocates, have in their various interventions, since the new policy, commended the CBN’s decision and advised that the BDCs should source their money having deviated from their core roles and resorted to undermining their privileges by embracing illegal dealings.
According to Nzekwe, BDCs are meant for light travellers, someone that is travelling and has no time to go to the bank who can just stopover at the airport and buy few dollars and travel with it.
For Uwaleke, the ban is consistent with the move by the CBN to unify exchange rates and bring more transparency to the forex market.
