Uniform Exchange rate: Commercial Banks in price war

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…as BDCs vow to dump CBN’s intervention for parallel market

By Kayode Tokede

Following the introduction of uniform foreign exchange rate on invisible market, Commercial banks have begun a price war in a move to attract customers and increase market shares.

Investigation by Nigerian NewsDirect revealed that some commercial banks have started sales of Personal Travel Allowance (PTA), Basic Travel Allowance (BTA), among others at N358/$1 to attract more end-users.

According to our correspondent’s findings, Naira rate at the parallel market last week was trading at N357/$1, the rate at which the apex bank is selling to commercial banks operating in the country.

Further findings revealed that the Central Bank of Nigeria (CBN) was selling to the BDC operators at N360, higher than what is obtainable at the parallel market.

Currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said since the harmonization of the invisible rate to N360/$1, commercial banks have introduced measures to win customers and enlarge their market shares.

He noted that players in the foreign exchange are leveraging on the CBN supply to gain market shares.

However, a reliable source explained to our correspondent that Bureau De Change (BDC) operators may dump the CBN’s $40,000 weekly intervention for parallel market.

Speaking exclusively with Nigerian NewsDirect, the President of Association of Bureaux De Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, lamented over commercial banks delisting the association, maintaining that banks excess charges forced the apex bank to remove commission on visible rate.

He thus questioned the apex banks’ differential in margins, stressing that BDC operators are only complementing the banks.

According to him, “Our stand is that CBN should remove the margin at which they are selling to banks and BDC operators.

“They are selling to banks at N357/$1 and to BDC operators at N360/$1. So automatically, that has put the operators at a disadvantage. If banks are buying at N357/$1 and selling at N360/$1, which is our buying rate, how do we compete in the market?

”Banks in the past were doing illegal charges. Normally, the banks should not have charged any commission on rate since they buy at N357/$1 and sell at N360/$1.

“Some of them because of fear for super profit were charging customers above the N3 which the CBN frowns at.

“CBN is only trying to warn banks’ extortion from end-users. From investigation, some banks were charging higher than N7.

“All these charges are hindering the appreciation of the Naira. Despite the CBN’s effort to stabilize the naira, it is unfortunate that key players are enforcing on end-users hidden charges.

“The banks are trying to de-market the BDCs operators but we are only complementary. We are not taking over banks’ business and they should not take over our business.

“There is no economy without BDCs operators. Their major purpose is to serve the retail end-users. It is so unfortunate that the CEO FDSH Merchant bank will be telling the public that members of the public can go to banks for better foreign exchange rate. It is an act of delisting BDCs just to ensure that we are out of business.

“The market rate is divided at which the CBN is selling to banks at N357/$1 and selling to BDC operators at N360/$1. We felt that it is not fair and it should be a open and fair market for all major players.”

The Bankers committee of the CBN last week directed commercial banks to stop commission charges from end-users on sales of Personal Travel Allowance (PTA), Basic Travel Allowance (BTA), among others, as foreign exchange rate now hamonised at N360 to the Dollar.

Speaking with  journalists on behalf of the committee, Managing Director/CEO of FSDH Merchant Bank, Mrs. Hamda Ambah, explained that the uniform sales at the invisible market will serve as palliative measures for individual Nigerians to access foreign exchange without commission charges by banks for such foreign exchange sales.

According to her, “One of the things that we agreed on at the meeting was something we measured that will be palliative for individuals in the economy. It was agreed that for foreign exchange at banks sale with CBN authority to their clients- PTA, BTA, school fess and for medical bills.

The South West Chairman, ABCON, Mr. Taiwo Ebenezer, who spoke with Nigerian NewsDirect, said, the measure, might force the operators to close shops, stating that end-users might consider the parallel market instead of the banks.

In his words, “The new measure will lead to low patronage. What the CBN is trying to achieve is to appreciate the Naira. All we expect is that equal measures should be given to key players.

“The parallel market is even selling below the CBN rate to banks. The end-users which should patronize the registered BDCs will rather visit parallel market where no documentation is required. “Automatically, the CBN is closing the BDC operations in Nigeria which will cause unemployment. Nationwide, we have over 4,000 registered BDC operators.  If you multiply 4,000 by three workers in each BDC offices nationwide, that means over 12,000 will be out of work because of the CBN policy.

“The bottom line of CBN policy is to achieve Naira appreciation and by so doing, the volume of transactions that will go to banks against the BDC will increase.”

The Acting Director Corporate Communications, CBN, Mr. Isaac Okoroafor, had said the feedback from the wholesale and retail segments of the Nigerian foreign exchange markets showed that customers were satisfied with their level of access to foreign exchange.

He said the degree of optimism displayed by all players underscored the fact that everyone was happy with the level of transparency in the market.

He also reiterated that the desire of the Bank was to ensure that all, particularly low end users, have access to foreign exchange to meet genuine needs. This, he said prompted the Bankers Committee, in its first meeting of 2018, to agree to sell United States dollars to those requiring it for invisible at the rate of N360/$1, without any commission whatsoever.

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