The Central Bank of Nigeria (CBN) recently announced the abrupt end to sales and outsourcing of foreign exchange to Bureau de Change (BDC) operators after accusing them of failing to stick to their core mandate. Instead of providing forex to retail users, BDCs are believed to be supplying the scarce resource to so-called “illegal” dealers.
BDC Operators Accused of Fueling Parallel Market Activity
The illegal dealers, in turn, avail the foreign exchange to clients at parallel market exchange rates. For instance, while the CBN insists that the naira’s exchange rate against the USD is currently pegged at around N411 for every dollar, parallel market dealers use an exchange rate of N500 for every dollar.
Explaining the rationale behind CBN’s decision to end forex sales to BDCs, governor Godwin Emefiele suggested that operators had been profiteering at the expense of suffering Nigerians. Therefore, the CBN’s intervention is aimed at putting an end to this practice. Emefiele explained:
This measure is not punitive on anyone, but it is to ensure the CBN is able to carry out its legitimate mandate of serving all Nigerians.
Commercial Banks Warned
As a consequence of Emefiele’s announcement, the CBN “will no longer process applications for BDC licences in the country.” On the other hand, the CBN’s weekly sales of foreign exchange will now “go directly to commercial banks.
In the meantime, Emefiele also used his speech, which was delivered following the conclusion of the CBN monetary policy committee meeting, to remind commercial banks that the central bank will “deal ruthlessly” with any institution that allows “illegal forex dealers to use their platforms.”
Emefiele also blasted international bodies, including embassies and donor agencies for being complicit in what he calls “illegal forex transactions that have hindered the flow of foreign exchange into the country.”