The Central Bank of Nigeria (CBN) has stated that it will no longer sell foreign exchange to bureau de change operators. In this same vein, the apex bank has also lifted the ban on cash deposits in domiciliary accounts held in Commercial banks.
According to the CBN Governor, “We have continued to observe that stakeholders in some of the subsectors have not been helpful in this direction. In particular, we have noted with grave concern that Bureau de Change (BDC) operators have abandoned the original objective of their establishment, which was to serve retail end users who need US$5,000 or less. Instead, they have become wholesale dealers in foreign exchange to the tune of millions of dollars per transaction. Thereafter, they use fake documentations like passport numbers, BVNs, boarding passes, and flight tickets to render weekly returns to the CBN.”
He stated that Nigeria is the only country in the world where the Central Bank sells dollars directly to BDCs. He maintained that 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 turn become greedy in their sales to ordinary Nigerians, with selling rates of as high as N250 per dollar.” He said the BDCs had risen from 74 in 2005 to 2,786 in 2016, with about 150 new BDC applications coming in every month, with same promoter owning multiple BDC outlets.
“The CBN sells US$60,000 to each BDC per week. This amount translates to US$167 million per week, and about US$8.6 billion per year. “In order to curtail this reserve depletion, we have reduced the amount of weekly sales to US$10,000 per BDC, which translates into US$28.4 million depletion of the foreign reserve per week and US$1.476 billion per annum. “This is a huge haemorrhage on our scarce foreign exchange reserves, and cannot continue especially because we are also concerned that BDCs have become a conduit for illicit trade and financial flows.”
He said that following the alleged activities of the BDCs, the CBN “would henceforth discontinue its sales of foreign exchange to BDCs”.
“Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws.
“The Bank would now permit commercial banks in the country to begin accepting cash deposits of foreign exchange from their customers.”
The banks have started sending emails and text messages to their customers with domiciliary accounts on this change. Even though no date was stated as to the stoppage of sale to BDCs, it is possible that it is with immediate effect.
We await the effect of this move on the FX market and the exchange rate.
