After its last Monetary Policy Meeting concluded on 27th July, 2021, the apex monetary institution in Nigeria, the Central Bank of Nigeria (CBN) dropped an unexpected (though some may argue late in coming) bombshell: no more sale of foreign exchange (forex) to Bureaux De Change (BDC) Operators in Nigeria. It anchored the move on illicit financial behaviour by many of the operators. To give further bite to the measure, the apex bank declared that it will no longer process new and in-progress BDC licences and that FX previously sold to the BDCs will now be sold to the commercial banks for invisible trades. It concluded by directing Nigerian deposit money banks to create dedicated teller points for FX sale to clients who provide complete and valid documents.
The first reaction of many including this writer was: have we not been through this route before? Other posers include: What has actually changed? Is this another knee jerk measure destined to be added to the long list of policy somersaults in Nigeria?
One can only at this point interrogate the stance of the CBN vis-à-vis the measure it has put in place to restore sanity in the FX market and ultimately stabilize the value of the naira if it can.
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The main thrust of CBN’s latest move is the bad behaviour of some BDC operators whose charges include funding of terrorist activities, engaging in unconscionable arbitrage, round tripping and money laundering. There’s no doubt that the CBN by virtue of its vantage position has valuable information to sustain the charges but the rider is: when did it realize that the operators have been engaging in these vices? With the exception of the charge relating to funding of terrorism which to all intents and purposes is within the purview of state security agencies to establish, those relating to arbitrage, round tripping, money laundering et cetera are within the ambit of the CBN to establish.
It will therefore be stupefyingly naïve for Nigeria’s apex monetary institution to suggest that its suspicious antenna in respect of round tripping and arbitrage was only raised with the deluge of monthly applications it received for BDC licences. Is the CBN suggesting by any stretch of imagination that it has not always been on top of its game? A pointed accusation has in fact been that many CBN officials are behind many BDCs. The apex bank needs to investigate this if indeed it has not started!
Not a few in supporting the CBN move have argued that it is patently an aberration for the apex bank to be doling out FX twice weekly (indeed more before now) to BDC operators; a practice not known anywhere in the world. BDCs are known to source their needs independently of the central banks where they are domiciled.
But the CBN wants the deposit money banks to fill in the gap immediately. Indeed, what has changed? I hope we’re not all in collective amnesia as to what gave rise to BDCs in the first place. Are we in for different species of humans manning the banking halls now?
It bears repeating that BDCs were brought on stream as a result of the cumbersome nature of documentation usually unleashed on hapless customers by their banks. It made no difference then what amount was requested or the nature of the transaction. It was almost always rigorous and tortuous! It seems the CBN is oblivious of this judging by its directive to deposit money banks to create dedicated teller points for FX sale to clients who provide complete and valid documents (emphasis mine).
The story of deposit money banks regarding FX transactions in Nigeria has never exactly been that salutary. Their history is quite replete with arbitrage, round tripping, money laundering etc; the very same charges BDC operators are now facing and being demonized. Stories abound of banks actually channeling some of their FX to BDCs and parallel markets and now the CBN is so confident that the dog will not devour the bone thrown at it! History may not exactly repeat itself but it may rhyme.
I don’t have the gift of clairvoyance to state that what transpired in 2016 when a similar measure was embarked upon by the CBN will replicate the same outcome in every material particular with the latest move. It may turn out to be a disappointment (and one sincerely prays it does) to the ‘nay sayers’ only if the apex bank will be firm this time and not yield to pressures from whatever quarters but more importantly rein in the banks that may now seek to appropriate the so called bad behaviour of the BDC operators to themselves. Fingers are crossed!
Dr Okolo is a chartered stockbroker and management consultant based in Lagos.
