One year after the Central Bank of Nigeria stopped dollar sales to them, Bureau De Change (BDC) operators are struggling to remain in business as the scarcity of the US currency in Nigeria has worsened.
The CBN, on July 28, 2021, stopped dollar sales to BDCs as a result of foreign exchange infractions, and pushed genuine demand for forex to commercial banks.
A top member of the Association of Bureau De Change of Nigeria said BDCs were sourcing dollars from individuals as the CBN and banks were no longer selling to them.
“We submit our annual financials to the CBN but we write nil on our monthly returns because we are not getting dollars,” the operators said, adding that many of the BDCs are looking to shift focus to other business sectors.
Meanwhile, the pressure on naira has continued at the official and parallel markets, with naira depreciating to N710 per dollar last week.
This is despite an increase in Nigeria’s external reserves, which have in the last one year risen by 17.82 percent to $39.27 billion as of July 26, 2022, from $33.33 billion on July 27, 2021.
“Excluding BDCs from forex has not helped. It has not been able to make any impact. Rather the situation has gotten worse. Naira depreciation has continued. We have not addressed the fundamental issues,” Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said.
According to him, the sharp depreciation of the naira at the parallel market has worsened the profitability of investments. The capacity to retain employment and create new jobs has been greatly endangered because of the foreign exchange crisis.
Aminu Gwadabe, president of ABCON, had called for the creation of BDCs’ Autonomous Foreign Exchange Trading Window, with a determined maximum daily limit for legible BDCs to access dollars from banks, autonomous market and diaspora forex widow at the prevailing market prices.
According to the CBN, the BDCs are financial institutions licensed to carry on small scale foreign exchange business on a stand-alone basis in Nigeria, serve as tools for the management of exchange rate and provide economic data for monetary policy decisions. Their activities impact on exchange rates; hence BDCs are important players in the money market.
Godwin Emefiele, governor of the CBN, who announced the stoppage of dollar sales to the BDCs at the end of the Monetary Policy Committee meeting in July 27, 2021, accused the BDCs of trading FX in wholesale quantities of over $5,000, in contravention of their licences and Nigeria’s FX regulations.
Emefiele said the BDCs had turned themselves away from their objectives and had become agents that facilitated graft and corruption in the country. “We cannot continue with the bad practices that are happening at the BDC market,” he said.
After stopping the dollar sales to the BDCs, the CBN pushed dollar sales for Personal Travel Allowance and Business Travel Allowance to commercial banks and increased FX supply to the lenders.
However, due to rising demand for dollars, the banks are not able to meet the legitimate needs of the end-users as the CBN has reduced its dollar allocation to banks due to low FX inflows.
