The naira fell slightly to the dollar at the parallel market few hours after the Central Bank of Nigeria on Tuesday announced the discontinuity of forex supplies to the Bureau de Change Operators in the country.
The Central Bank of Nigeria (CBN) yesterday stopped sale of foreign exchange to Bureau de Change operators (BDCs) across the country.
The CBN governor outlined that the main angst with the BDC operators was that the BDCs continued to create artificial FX scarcity in a bid to seek “abnormal” profits thus introducing risks to the Nigerian financial system.
He further noted several behaviours which were unhelpful to CBN’s price stability objectives such as rent-seeking BDC operators only interested in large margins, dollarization of the Nigerian economy, subversion of the cashless policy, common ownership of several BDC by the same owners to obtain multiple FX, and ‘regrettably’ international organization and embassy patronage of illegal FX dealers.
Meanwhile, the naira fell slightly to the dollar few hours after the CBN’s announcement.
According to naijabdcs.com, the official websites of the BDCs, the naira which exchanged to the dollars at N503/$ on Monday was bought and sold for N503 and N505 on Tuesday evening.
The CBN had been supplying each licensed BDCs $10,000 twice per week at the rate of N393 with the instruction that they should sell with a margin of N2.
Economist and former Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, said what was happening in the foreign exchange market was a consequence of the CBN’s policy choice of a fixed exchange rate regime and administrative allocation of forex.
He said, “It is a policy regime that has created a huge enterprise around foreign exchange – round tripping, speculation, over invoicing, capital flight etc.
“The action of the apex bank amounts to tackling the symptoms rather than dealing with the causative factors, which is not a sustainable solution.
“It is regrettable that the CBN does not believe in the market mechanism. Yet market systems are time tested as instruments of efficient resource allocation in leading economies around the world.”
He added, “Moving retail forex transactions from BDCs to the banks was like kicking the can down the road. The same issues would manifest even with the banks.”
According to him, the way out of the foreign exchange conundrum was for the CBN to allow the market to function.
He said, “The CBN needs to give the market a chance. Its current approach would continue to deepen distortions in the economy, perpetuate round tripping, fuel speculation, suppress forex supply and boost underground economy.”
