CBN Stops Dollar Sales to Bureau de Change Operators
The Central Bank of Nigeria (CBN) has announced it has stopped its weekly dollar sales to Bureau De Change (BDCs) in the country amidst a steep dollar shortage as policy authority expressed disappointment in operators transactions.
The policy authority made the statement at its July 2021 meeting that ends Tuesday. Despite weekly foreign exchange supply into the segment, spreads on the exchange rate between official and parallel market has remained elevated.
Godwin Emefiele, the Central Bank Governor said the BDCs operators had abandoned the objectives of their establishment, which is to serve the retail end-users who need $5,000 or less.
Instead, BDC operators have become wholesale dealers and illegally transact foreign exchange to the tune of millions of dollars per transaction against the prescribed benchmark.
On a weekly basis, the CBN sells about $110.10 million to the BDCs with operating getting as much as US$20,000 per BDC, translating to US$5.72 billion in a year.
However, analysts spotted the downside to discontinuation of dollar sales to BDCs, though CBN plans to increase FX supply to deposits money banks for eligible transactions.
Angered by their unethical display, CBN said will not process new licenses for BDC operation in the country. This extends to all the licenses being processing, regardless of the stage of that process
However, the apex bank indicates a decision to channel the allocation meant for BDC, to Commercial Banks to meet the legitimate needs of FX demands
It said the Commercial Banks will immediately create a Teller Point in their designated branches for disbursement of FX to customers who desire FX for legitimate, eligible purposes.
At the just concluded meeting, the policy committee reviewed the developments in the global and domestic environment in the half-year of 2021, particularly the improved vaccination, which has led to economic growth in many countries.
It also considered the global and domestic financial environments as well as the outlook and possible risks in the second half of 2021. The nine members of the committee were in attendance and they considered the direction of all the policy parameters.
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Reacting to the development, Pan-Africa Capital said over the past three months, the inflation rate has maintained a steady decline, slowing to 17.75% in June 2021 as harvest season resumes.
Analysts recalled that Nigeria recorded a tepid economic growth of 0.51% in the first quarter of the year, driven by improved vaccination and economic activities.
“The decision of the CBN to hold all the policy parameter constant is in line with our expectation as we expect the harvest season to suppress the inflation rate going forward.
“In addition, the intervention funds of the CBN is expected to spur economic growth in the remaining quarters of the year.
“The decision of the Apex bank to discontinue the sale of FX to BDC is not expected to reduce the Apex Bank’s supply to Nigeria’s FX market.
“The constant intervention of the CBN in the market will still continue, though through a formal channel – the Commercial Banks. However, this may lead to speculation in the FX market and further depreciation of Naira”, analysts said.
CBN Stops Dollar Sales to Bureau de Change Operators
