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Forex Crisis: BDCs Lose N32.5bn In 18 Months – As Naira Heads For N350 To US$1

Bureau De Change (BDC) operators predict grim future for Nigeria’s foreign exchange market

Sam Diala
Bureaux De Change (BDC) operators in the country are nursing their wounds following the recent decision by the Central Bank of Nigeria (CBN) to halt direct sales of foreign exchange (Forex) to this window of the Forex market. The apex bank last Monday announced immediate discontinuation of sale of Forex to BDC operators as a way of stemming the sharp slide in the value of the Naira, which has worsened since mid-last year following the dip in the prices of oil in the international market.
According to the CBN Governor, Godwin Emefiele, the bank has a constitutional responsibility to manage the nation’s currency to avoid the rapid depreciation it has suffered in recent past. Emefiele, who accused the BDC operators of fraudulent practices and sabotaging the bank’s efforts to stablise the exchange rate, observed that the BDCs had abandoned the original objective of their establishment.
“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,” Emefiele disclosed at a press conference in Abuja.
However, the Association of Bureau De Change of Nigeria (ABCON), through its Acting President, Muhammed El-Amin Gwadabe, has accused the CBN of deliberately inflicting injury on the group, thereby setting the stage for thousands of its members to be thrown into the labour market.
In an exclusive interview with The UNION, Gwadabe, lamented the policy inconsistency that characterised the CBN’s managementof the nation’s foreign exchange, resulting in inflicting injury on BDC operators.
Gwadabe also disclosed that each of the 3,000 members of the association had lost $55,000 between July 2014 and now. At the current exchange rate of N197 to a Dollar and when inflation is factored in, each BDC operator has suffered a loss of $55,000 in the past 18 months, the ABCON president noted.
He said, “The new policy is not the solution. The solution is to save the Naira from depreciation. Of course, the Naira has already depreciated – we are now talking of N300 to a Dollar. Many of our members are going to close shop. Our members have lost $55,000 between July and now.
“We each made N35million deposit when the official exchange rate was N158 to a Dollar. If you calculate what we have lost within that period, and factoring in inflation, it will amount to about $55,000 per operator.”
He observed that, given CBN directive to BDCs to source their Forex from “autonomous” sources, the exchange rate will worsen as the operators would sell to cover their cost.

“Virtually everything we consume is imported; that means, we have cost-push inflation. Now, our members are going to source their dollar from autonomous sources, that means the price will go up. It is a function of demand and supply; high demand for a scarce commodity, and this will lead to the proliferation of street hawkers which the CBN had tried to eliminate.
“Creating an army of street hawkers in a time of Forex scarcity, will worsen the already bad situation”, Gwadabe said, adding, “The black market will now have an upper hand. If care is not taken the rate of issuance of fake currency, which CBN had tried to nip in the bud, will exacerbate.”
He was also emphatic about the huge job loss that would result from the new policy, a development he said would be inevitable following the closure of business that many of the operators would experience.
Gwadabe accused CBN of breach of trust as the N35 million licence fee imposed on the BDCs was based on the understanding that the operators would be appointed agents to Western Union (international money transfer). He called on the apex bank to consider refunding the N35 million licence fee paid by each operator or reverting to the previous licence fee of $20,000.
“Why collect that money (licence fee), if they are not going to relate with us? We deposited over N100bn with CBN and this is not yielding the level of interest the bank pays on Treasury Bills
“The essence of collecting that money was to make us agents to Western Union to increase our volume. That has not been achieved. We are all Nigerians and we appreciate the situation. We know the challenges – tumbling oil price from over $100 per barrel to below $30 per barrel and rapid depletion of the foreign reserves” the ABCON president said, while condemning the CBN position that the BDC operators engage in criminal acts.
According to Gwadebe, “The criminalisation is what we are against. Like every other group, we may have some bad eggs among us, but generalising us as criminals in a system created by CBN itself, will not send a positive signal to the market and the economy.”
Gwadebe further observed that the CBN has not defined what it refers to as “autonomous” sources, which he said would deepen the crisis in the Forex market.
“CBN has not even defined or clarified autonomous sources. To us, autonomous sources include buying from banks, oil companies and exporters. There is no directive that any of these institutions can sell dollars. This means that those that are able to source for the Forex would sell at astronomically high rate, and there will be no price standard.
“At the rate we are going, the Naira is likely to depreciate to N350 to the Dollar shortly,” the ABDCON president warned.

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