*As MPC holds all monetary parameters constant
*Expert hails apex bank for decision
Philip Clement, Abuja
Henceforth, there would be no more forex available to Bureau de Change operators as the Central Bank of Nigeria has banned sales of foreign currencies to the operators.
The CBN Governor, Mr. Godwin Emefiele, announced this at the end of the Monetary Policy Committee meeting held at the CBN headquarters in Abuja on Tuesday.
The governor also said that the CBN will channel the sale of foreign exchange to banks henceforth, adding that all banks should create a teller point for sale and disbursement of forex to their customers.
He also said the CBN will no longer process any new application for BDC licenses.
In the same vein, Emefiele announced that the Monetary Policy Committee (MPC) of the bank has voted unanimously to retain the Monetary Policy Rate at 11.5 percent.
It also retained the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 percent respectively.
Announcing the committee’s decision, the CBN boss said the committee also retained the asymmetric corridor of +100/-700 basis points around the MPR.
He said although the economy has succeeded in exiting the recession, adding that the recovery was very fragile, given that the Gross Domestic Product was still far below population growth rate.
The committee, he noted, was of the strong view to consolidate on all administrative measures currently being taken to spur output growth.
Meanwhile, a financial analyst, Prof. Uche Uwaleke, has hailed the decision of the CBN to hold parameters, saying it was expected owing to the fragile nature of the economy.
He, however, highlighted the Pros and Cons of the forex ban while stating that it is in the best interest of the economy.
Speaking to The Daily Times, he said: “The decision by the CBN to stop forex sales to BDCs has merits and demerits. Having said that, I think it is in the best interest of the Nigerian economy.
“On the positive side, it is consistent with the move by the CBN to unify Exchange rates and bring more transparency to the forex market.
“Exchange rate unification is in line with the IMF and World Bank’s recommendations and so improves the country’s profile and credit standing before International financial institutions. It signifies that the country is serious in her reform efforts,”
Speaking on the implication, Uwaleke said: “The decision will slow down the rate of depletion in external reserves.
The move is likely to check round tripping of forex and reduce supply of forex in the parallel market.
“Further, speculative demand for forex is also likely to reduce. I am aware that BDCs have been accused of being vehicles for bribery and corruption. This will likely reduce.
“On the flip side, this measure will wipe out the employment opportunities created in the sector with over 5000 BDCs with several others waiting to be licensed.
“Also, the gap between the AFEX rates and parallel market rates is likely to widen further with dollar shortages in BDC and parallel market segments”.
The financial expert further stated that going forward, the CBN should ensure that purchase of forex via the banks which will now increase is made stress free with minimal documentation, as it remains the reason why people prefer to move to the parallel market.
Huge blow to over N1 trillion BDC market
The Daily Times reported earlier that the BDC market has a turnover of N1 trillion or more annually, according to President, Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe.
Speaking recently at a virtual event, he said “licenced BDC operators were commanding a N1 trillion annual turnover, they have evolved to become key players in the foreign exchange market having made several commitments to ensure that the sector continues to thrive against all odds.”
As such, he said the association is appealing to the Central Bank of Nigeria (CBN) to allow investors and Diaspora Remittances senders to freely interact with the BDCs bid and offer rates and make the BDCs pay out agents for remittances.
Noting that up to 85 per cent of remittance inflows end up on the streets, he said with some of the remittances coming through the BDC, the value of the naira would gain strength sooner than anticipated.
“The huge gaps between the fixed exchange rates and the flexible exchange rates in the market serve as an incentive for arbitrage and use of unlicensed channels for huge diaspora inflows. This gap should be bridged to discourage those profiting from it.
“The foreign currencies dealt in by a BDC is derived from private sources and such other sources which may include the CBN window as determined by the CBN from time to time for the purpose of funding Business Travel Allowance (BTA), Personal Travel Allowance (PTA), School Fees Payment Abroad, Medicals, mortgage and subscriptions,” he added.
As at the time of filing this report, the ABCON President couldn’t respond to calls put across to him for reaction to the recent development.