3000 BDC operators get $2.64bn FX supply in 22 weeks

Bureau de Change

By: Adebisi Ademola

In a move to achieve exchange rate convergence and stability, the Central Bank of Nigeria has injected $2.64 billion in 22 weeks to cushion the dollar crisis on 3000 Bureau De Change (BDC) operators in the country.

The CBN in April 14, 2017 had resolved to raise foreign exchange supply to BDC operators to $40,000 weekly from the $20,000 weekly it sold to the each currency dealers.

The estimated $2.64 billion supply to BDCs operators by insidebusinessOnline ended September 30, 2017, though the CBN continues its intervention to the operators in October.

A source hinted our correspondent that since the announcement in April 14, the apex has supplied each 3,000 BDC operators $40,000 on weekly basis.

The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, said limited access to foreign exchange is impacting negatively on its association despite the CBN’s weekly intervention.

He noted that the multiple rates at which banks buy foreign exchange at N358/Dollar while BDCs operators buy at N360/Dollar from the same CBN window is also another challenging facing the operators.

The CBN was reported to have met with BDC operators to “correct” the conflicting exchange rates.

Gwadabe, disclosed further that banks are obnoxious charging its members and it is affecting BDCs operators in Nigeria.

He admitted that the prevalence of unregistered operators is another issue, stressing that public preference of open market ( parallel market) is killing the BDC business.

Recently, some unregistered BDC operators were arrested by Operatives of the Department of State Security (DSS) across the country.

Also raided by the DSS operatives were registered BDCs operators who were accused of selling the Dollar above N400.

The development, BDC dealers said, forced some of the operators to seek means of selling foreign currencies in their possession, especially dollars, pounds and Euros at stipulated rates.

The South West Chairman, Association of Bureau de Change Operators of Nigeria (ABCON), Mr. Taiwo Ebenezer, speaking with insidebusiness online confirmed the weekly intervention since April.

“CBN supplies $20,000 foreign exchange to BDCs operators on Monday and another $20,000 on Thursday”.

He noted that the association still seek CBN to lower the margin.

“We have been appealing to CBN to lower the margin at which they supply commercial banks”

“BDC operators buy from CBN at N360/Dollar. We are directed by CBN to sell at N362/Dollar and if you check the market rate presently, hardly will a BDC operator sell at N361.5/ Dollar. We will continue to appeal to CBN to review the rate since it will benefit the nation’s economy,” he explained.

The Naira on Friday closed at N362 against the Dollar at the parallel market rate and N360.25 against the Dollar at the interbank rate.

Similarly, the Naira at the Bureau De Change segment was trading at N363/Dollar.

However, finance analysts said apex bank $40,000 weekly intervention to BDC operators is targeted at curbing the parallel market and improve on CBN’s foreign exchange market transparency.

A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun said, “foreign exchange supply to banks and BDC operators are two separate markets with different outlook to the business. The commercial banks are expected to help the CBN boost the foreign exchange market while the BDC operators are out to sell to retail end.

“While the BDCs are selling to retail customers, Banks are selling to wholesale customers- with that, you don’t expect both to have the same rate.

“CBN only supply foreign exchange to BDCs to narrow the parallel market rate and today as we speak, the parallel market rate is between N360/Dollar and N361/Dollar. The idea is that there will be much divergent between what banks sell and BDC operators- there will be no incentive for round trapping.”

He explained further that the idea behind CBN’s $40,000 weekly intervention to BDC operators is to take out the parallel market..

According to him, “The master plan by CBN is to take out parallel market operators from the business and that is the essence of introducing Investors & Exporters Foreign Exchange Window (IEFX) and Nigerian Autonomous Foreign Exchange Fixing (NAFEX).

“If we have the rate that is narrow at the foreign exchange market, investors will prefer to buy from the official market which is more legitimate than transacting business in the parallel market.

“Once the foreign exchange market easy, it will give investors motivation to buy at the official market and there will be stability around the Naira which is the ultimate idea of the CBN,”  he said.

The Managing Director, Maxifund Investments and Securities Limited, Mr. Okechukwu Unegbu, said “the BDC operators are facing documentation challenges unlike commercial Banks, but that does not justify CBN’s rate between the two.”

“The only benefit of CBN’s $40,000 weekly intervention to BDC operators is that it has reduced demand at the parallel market. The BDC operators are only looking for means to making maximum profit from CBN’s weekly intervention and BDC operation on foreign supply are not transparent unlike commercial banks.”