No plans to review new forex rule, CBN tells BDCs

Following a call at the weekend by the Bureau De Change operators in Nigeria for a review of the new foreign exchange (FX) rule by the Central Bank of Nigeria (CBN), the apex bank has insisted that there is no such plan.

The CBN through Ibrahim Muazu, director, corporate communication, said the decision it took last week was for the good of the economy at large.

There is no justification for a review of the stoppage of dollar to the BDCs because the central banks of other countries of the world do not fund their BDCs, Muazu said, saying, “they have been operating from two windows – the CBN window and the autonomous window. Now, one window is shut, they have to use the next window.”

The CBN last week discontinued its sales of FX to BDCs and directed operators to source their FX from autonomous source.

Consequently, the Association of Bureau De Change Operators of Nigeria (ABCON) on Friday took a position that the CBN should review downward the N35 million caution deposit and that the interest of the fee should be paid on treasury bill rate.

The BDCs demand a clarification from the CBN on what it means by autonomous source, adding that their exchange rate margin should be increased.

Aminu Gwadabe, acting president, ABCON, who addressed journalists after a national meeting in Lagos, said the way forward was continuous engagement with ABCON on how to address the depreciation of the naira in the parallel market.

“The decision of the CBN to stop dollar sales to BDCs has grave implications for the economy.  First is the spike in the parallel market exchange rate from N270 to over N290 per dollar within three days of its pronouncement. Over time, this would lead to increased scarcity of dollars even for legitimate activities and further depreciation of the naira,” he said.

There is need for the CBN to review the scope of the operations of BDCs and partner the ABCON to conduct regular training and capacity building programmes for BDCs, Gwadabe said.

The CBN started selling dollars to BDCs in 2006, when there were about 270 BDCs in the country. He explained that the BDC industry was created by the CBN to fill a critical gap in the retail segment of the FX market.

According to him, the decision to sell dollars to BDCs was in recognition of the role of BDCs to counter the effect of the illegal currency traffickers and the continued depreciation of the naira in the parallel market.

“As you will recall, it was the involvement of the BDCs through the Direct Sale of Dollars that led to the historic convergence of exchange rates in the country in 2006. Thus, contrary to the impression created by the CBN, BDCs are not the problem of the FX market, rather they are solutions to deep rooted problems in the market, namely activities of illegal FX operators and the wide gap between the official and the parallel market exchange rates,” he said.

 

HOPE MOSES-ASHIKE