The Central Bank of Nigeria (CBN) has announced additional guidelines for Bureau De Change (BDC) operators as it moves to reduce the dollar exchange rate and improve the efficiency of the Nigerian foreign exchange market.
The decision, contained in a circular dated 17 August, comes two years after the apex bank, under the leadership of Godwin Emefiele, banned the sale of dollars to BDCs in August 2021 amid efforts to stabilize the market, saying the parallel market had become a conduit for illicit forex flows and graft.
“We are concerned that BDCs have allowed themselves to be used for graft,” Mr Emefiele said. He argued that international bodies, including some embassies and donor agencies, had been complicit in illegal forex transactions that hindered the flow of foreign exchange into the country.
However, the latest directive does not state that the CBN will resume the sale of dollars to the BDCs.
The new operational mechanism states that BDC operators’ spread on buying and selling will be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian Foreign Exchange market window weighted average rate of the previous days.
In the circular, signed by O.S Nnaji, the Director of the Exchange Department, the CBN ordered a mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly) on the Financial Institution Form Rendition System (FIFX) which it said has been upgraded to meet individual operators requirements.
The CBN warned that non-rendition of returns would attract sanctions, including withdrawal of operating license with effect from the date of the circular.
Operators are expected to render nil returns when they do not have any transactions within the period. Please be guided accordingly and ensure compliance,” the circular said.
Read also: Analysing Tinubu’s plan to curb inflation as Nigeria hits 18-year high of 24.08%
CBN’s latest directive to BDCs, a move to curb rising inflation?
Earlier this week, Folashodun Shonubi explained that speculators were to blame for the high dollar exchange rate to the naira at BDCs. He told journalists that the apex bank was making moves to stabilise the forex market, although some plans would not be disclosed then. However, he mentioned that the government would put measures in place to check the activities of currency speculators.
“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply but are topped by speculative demand from people,” he told journalists after the meeting.
“Some of the plans and strategies, which I’m not at liberty to share with you, means sooner rather than later, the speculators should be careful because we believe the things we’re doing when they come to fruition may result in significant losses to them.”
BDCs want to provide liquidity to the forex market
Similarly, the Association of Bureau De Change Operators of Nigeria (ABCON) operators asked the Central Bank of Nigeria to consider approving its bid to provide the forex market with liquidity earlier this week. This is part of efforts to prevent the Naira from falling further, a trend that has contributed to the country’s inflation.
Aminu Gwadebe, the ABCON president, told Nairametrics that allowing Bureau De Change operators to offer liquidity increases the number of players performing that action, thus reducing the chances of price slippage, citing the contributions of Bureau De Change vendors to stabilizing the Naira in 2006, 2009, and 2017.
“I quickly want to advise the apex bank to leverage on the BDCs and allow them access banks’ autonomous window and agency of international money transfer operators. The BDCs are effective tools of the transmission mechanism of the CENTRAL BANK MONETARY POLICIES,”
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
