Central Bank of Nigeria has said it would no longer sell foreign exchange to bureau de change operators. The governor of the apex bank, Mr. Godwin Emefiele, stated this at a press conference in Abuja yesterday, remarking that “The Bank will henceforth discontinue its sales of foreign exchange to BDCs (bureaux de change).” Emefiele also said the CBN would now allow commercial banks to accept cash deposits of foreign exchange from their customers. “Operators in this segment of the market would now need to source their foreign exchange from autonomous source.
“The CBN sold dollars to BDC operators for the better part of 2015, in its bid to keep the official and unofficial price of the naira close to each other.” He noted that “Despite the fact that Nigeria is the only country in the world where the Central Bank sells dollars directly to BDCs, operators in this segment have not reciprocated the Bank’s gesture to help maintain stability in the market.
Whereas the Bank has continued to sell US Dollars at about N197 per dollar to these operators, they have in turned become greedy in their sales to ordinary Nigerians, with selling rates of as high as N250 per dollar. “Given this rent-seeking behaviour, it is not surprising that since the CBN began to sell foreign exchange to BDCs, the number of operators have risen from a mere 74 in 2005 to 2,786 BDCs today.
In addition, the CBN receives close to 150 new applications for BDC licenses every month. “Rather than help to achieve the laudable objectives for which they were licensed, the Bank has noted the following unintended outcomes: Avalanche of rent-seeking operators only interested in widening margins and profits from the foreign exchange market, regardless of prevailing official and interbank rates; “Potential financing of unauthorized transactions with foreign exchange procured from the CBN; gradual dollarization of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative and prevailing ownership of several BDCs by the same promoters in order to illegally buy foreign currencies multiple times from the CBN.