Naira volatility worsened yesterday, after the Central Bank of Nigeria (CBN) stopped the sale of foreign exchange (forex) to Bureaux De Change (BDCs). The local currency exchanged in the parallel market for N300 to a dollar in Kano; N295 in Abuja and N290 in Lagos.
President, Bureaux De Change Association of Nigeria (ABCON) Aminu Gwadabe, who confirmed the development, expects the situation to get worse in the coming days. He said his group will continue to engage the CBN on the need to reverse the policy, which “will continue to hurt the economy”.
But CBN spokesman, Ibrahim Mu’azu said the market reaction was expected becauses greedy dealers are taking advantage of the policy shift. He said the naira strenght should not be assessed through the parallel market.
CBN Governor Godwin Emefiele had announced a new forex policy that includes the stoppage of weekly dollar sale to BDCs.
“The bank (CBN) would henceforth discontinue its sale of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws,” Emefiele yesterday said at news conference on the review of the forex policy at CBN’s Abuja head office.
He flayed the BDCs for abandoning the original objective for their establishment, which was to serve retail-end-users, who need $5,000 or less. The operators, he noted, have become wholesale dealers in forex to the tune of millions of dollars per transaction, only to come up with fake documentations such as passport numbers, Bank Verification Numbers (BVN), boarding passes and flight tickets to render weekly returns to the CBN.
The apex bank took some measures on forex following a drop in oil prices from a peak of $114 barrel in July 2014 to as low as $33/barrel this month. The reserves have also suffered great pressure from speculative attacks, round-tripping and front loading activities by actors in the forex market.
Before the hammer fell, the CBN was selling $60,000 to each BDC weekly, translating to $167 million per weekly and about $8.6 billion yearly.
The amount was reduced to $10,000 per BDC, translating into $28.4 million depletion of the foreign reserve per week and $1.476 billion per annum.