Nigerian FX traders go undercover following nationwide EFCC crackdown

In response to policy changes targeting Bureau de Change (BDC) operators, currency traders and operators have been avoiding street trading due to fears of arrest by the Economic and Financial Crimes Commission (EFCC), according to three operators who spoke to TechCabal on Monday. Over 100 currency traders in Lagos were arrested by the EFCC last week amid escalating FX volatility.

A currency trader in Masha reported that numerous BDC agents have gone into hiding since last week to evade arrest. Similarly, Abbas, a BDC operator in Tejuosho, a popular shopping complex and currency trading hotspot in Lagos, now operates from his office, rather than in the open market.

In May 2023, the Central Bank of Nigeria (CBN) relaxed FX controls with hopes for rate harmonisation and stability, which instead led to a sharp decline in the Naira’s value. The government is now desperately trying to rectify this issue, with the arrest of BDC operators being the latest in a line of unconventional policies.

An individual familiar with the CBN’s operations suggested that the bank believes market manipulations are taking place. However, this crackdown seems to have led to short-term stability, with exchange rates settling at around ₦1500/$1 on Monday morning, a decrease from the ₦1800/$1 quoted on Friday.

Last week, Nigerian authorities also blocked access to crypto company websites and set fixed rates on Binance, a global crypto exchange. While the government believes that speculators are artificially inflating prices, many experts point to a lack of liquidity as the root of the issue.

An insider at CBN told TechCabal that unless the central bank implements systemic changes to address the liquidity problem, any change in the market, even positive, will be temporary. However, this source expressed optimism about the CBN’s proposed plans for a sustainable fix, which may include funding BDC operators with solid transaction records, raising interest rates to attract foreign investment, and reducing demand for the dollar.

This follows reports of task forces being set up by the Central Bank of Nigeria in conjunction with the National Security Adviser, which employs the police force and the EFCC to track down and arrest speculators believed to be involved in activities devaluing the naira.