The Central Bank of Nigeria (CBN) on Tuesday halted its weekly foreign exchange allocation to the Bureau De Change (BDCs) operators to tame arbitrary transactions in that market and guard against further depletion of the foreign reserves which currently stands at $33.8bn.
CBN governor, Godwin Emefiele made the announcement in Abuja at the end of the Monetary Policy Committee (MPC), which decided unanimously to retain all benchmark monetary rates unchanged for the 4th straight time in 2021.
“We are worried about the activities of the Bureau De Change (BDCs) in the country.
“The MPC dealt extensively with this issue and regretted that the shameful operations of the BDCs with allocations from the CBN were hurting the economy,” Emefiele told the press conference.
Apart from discontinuing forex sale to BDCs henceforth, the CBN will now channel a significant amount of the Forex which it allocates to the money changers, to commercial banks to enable them to fund legitimate demands for travel, tuition, medical bills, among others.
The CBN, Emefiele announced, further directed banks to create special tellers in their branches to attend to legitimate demands by customers.
Emefiele raised concerns that demand for forex continues to surge at a time that inflows remain low, and that rather than help the authorities achieve policy targets, the BDCs have abandoned their original mandate, transacting deals worth millions of dollars each day.
The CBN sells $20,000 to BDCs per week, amounting to $110m per month and $5.72bn a year, and remains the only country that sells forex directly to the BDCs.
Emefiele told journalists that it is shameful that they have turned to rent-seeking behaviors and in the process have enriched themselves tremendously at the detriment of the Nigerian economy.
As of 2005, there were only 74 BDCs licensed to operate in Nigeria, but the number rose to over 2,500 in 2016 and then to almost 5,000 as of today. Emefiele said the CBN receives over 500 new applications monthly for licenses.
“This got us curious that there has to be something about this business that everybody wants a license.”
“The BDCs have become somehow greedy and recalcitrant to the detriment of Nigerians. They have become wholesale dealers in the tune of millions of dollars a day,” he also noted.
The Governor said there were widening margins and profits in the BDC market on account of an avalanche of rent-seeking operators who are Ben on destroying the economy.
He also raised the concerns that the operations of the BDCs have seen a Gradual dollarisation of the Nigerian economy, while investigations show numerous illegal and unauthorised transactions, in which the money changers have been seen to aid Money laundering activities.
Investigations also showed that several embassies and foreign institutions operating in the county patronize the BDCs to fund their local operations rather than go through official sources.
“We will deal with those banks who have served as collaborators and for the foreign organisations, we will write their head offices,” he vowed.