By Ayobami Adedinni
In a move to achieve exchange rate convergence and stability, the Central Bank of Nigeria has injected $2.64 billion in 22 weeks to cushion the dollar crisis on 3000 Bureau De Change (BDC) operators in the country.
The CBN in April 14, 2017 had resolved to raise foreign exchange supply to BDC operators to $40,000 weekly from the $20,000 weekly it sold to currency dealers.
A source hinted our correspondent that since the announcement on April 14, the apex bank has supplied each 3,000 BDC operators $40,000 on weekly basis.
The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, said limited access to foreign exchange is impacting negatively on its association despite the CBN’s weekly intervention.
He noted that the multiple rates at which banks buy foreign exchange at N358/Dollar while BDCs operators buy at N360/Dollar from the same CBN window is also another challenge facing the operators.
The CBN was reported to have met with BDC operators to “correct” the conflicting exchange rates.
Gwadabe, disclosed further that banks are obnoxious charging its members and it is affecting BDCs operators in Nigeria.
He admitted that the prevalence of unregistered operators is another issue, stressing that public preference of open market ( parallel market) is killing the BDC business.
Recently, some unregistered BDC operators were arrested by Operatives of the Department of State Security (DSS) across the country.
Also raided by the DSS operatives were registered BDCs operators who were accused of selling the Dollar above N400.
The development, BDC dealers said, forced some of the operators to seek means of selling foreign currencies in their possession, especially dollars, pounds and Euros at stipulated rates.
However, finance analysts said apex bank $40,000 weekly intervention to BDC operators is targeted at curbing the parallel market and improve on CBN’s foreign exchange market transparency.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun said, “foreign exchange supply to banks and BDC operators are two separate markets with different outlook to the business. The commercial banks are expected to help the CBN boost the foreign exchange market while the BDC operators are out to sell to retail end.
“While the BDCs are selling to retail customers, Banks are selling to wholesale customers- with that, you don’t expect both to have the same rate.
“CBN only supplies foreign exchange to BDCs to narrow the parallel market rate and today as we speak, the parallel market rate is between N360/Dollar and N361/Dollar. The idea is that there will be much divergence between what banks sell and BDC operators- there will be no incentive for round trapping.”
He explained further that the idea behind CBN’s $40,000 weekly intervention to BDC operators is to take out the parallel market..
According to him, “The master plan by CBN is to take out parallel market operators from the business and that is the essence of introducing Investors & Exporters Foreign Exchange Window (IEFX) and Nigerian Autonomous Foreign Exchange Fixing (NAFEX).
“If we have the rate that is narrow at the foreign exchange market, investors will prefer to buy from the official market which is more legitimate than transacting business in the parallel market.
“Once the foreign exchange market is easy, it will give investors motivation to buy at the official market and there will be stability around the Naira which is the ultimate idea of the CBN,” he said.
However, the Managing Director, Maxifund Investments and Securities Limited, Mr. Okechukwu Unegbu, said “the BDC operators are facing documentation challenges unlike commercial Banks, but that does not justify CBN’s rate between the two.”
“The only benefit of CBN’s $40,000 weekly intervention to BDC operators is that it has reduced demand at the parallel market. The BDC operators are only looking for means to making maximum profit from CBN’s weekly intervention and BDC operation on foreign supply are not transparent unlike commercial banks.”