BDC operators struggle to buy forex despite naira recovery
BY MOTOLANI OSENI
Bureau De Change (BDC) operators in Nigeria, represented by the Association of Bureau De Change Operators of Nigeria (ABCON), are facing difficulties purchasing foreign exchange (forex) from banks, despite the recent recovery of the naira.
The ABCON President, Aminu Gwadebe, explained that the issue arises from the disparity between the parallel market rate and the interbank sales rate, with the former currently trading lower than the interbank rate. Gwadebe highlighted that while the banks are offering a weighted average of N1505/$, the parallel market rate is at N1503/$, forcing BDCs to refrain from buying from banks due to the unprofitable spread.
Gwadebe acknowledged the naira’s recent stability and appreciation in the forex market, which was initially driven by the convergence of official and parallel market rates. However, he noted that the current situation poses challenges for licensed currency traders, as the lower parallel market rate undercuts the official rate provided by the banks.
To address this, Gwadebe urged the Central Bank of Nigeria (CBN) to impose a prudential percentage on the volume of diaspora remittances and portfolio investment proceeds sold by banks to BDCs.
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He believes such a measure would help ensure a steady supply of forex while curbing illegal economic behaviors, such as currency substitution, speculation, and frivolous demand.
Additionally, Gwadebe stressed the importance of continued regulatory oversight, including transparency in the sales margins between banks and BDCs.
He also called on the CBN to maintain its intervention sales to BDCs to bolster the naira’s strength, noting that fiscal authorities should address the fiscal deficit and inflation concerns to support the naira further.
In recent weeks, ABCON had commended its members for successfully implementing the CBN’s forex policy, which allows licensed BDC operators to purchase forex directly from banks. This policy has contributed to the naira’s impressive appreciation, driven by growing investor confidence and an influx of portfolio investments into the banking sector.
Gwadebe concluded by urging the CBN to continue collaborating with BDC operators to ensure a steady supply of forex at the retail level, where market volatility remains a challenge.
