Central Bank of Nigeria Governor Godwin Emefiele descended heavily of Bureaux de Change (BDCs) last week with a ban on their access to CBN’s official foreign exchange allocation. At the end of its Monetary Policy Committee meeting on July 27, Emefiele announced the restriction, accusing BDCs of violating forex sale rules by enabling fraudsters to launder illicit funds.
Emefiele said, “They have turned themselves away from their objectives. They are now agents that facilitate graft and corruption in the country. We cannot continue with the bad practices that are happening at the BDC market…Several international organisations, embassies patronise BDCs through illegal forex dealers to fund their institutions…We will deal ruthlessly with Nigerian banks that deal with illegal BDCs and we will report foreign organisations patronising them.”
Though financial experts have hailed CBN’s decision, it is shocking that the apex bank watched with complacency how its policy was abused over the years. For instance, CBN sold the US dollar to BDCs at N397 and they were instructed to sell it with a few naira’s profit margin but the BDCs resold it to customers at nearly N500/$1, making a profit of N100 for every dollar. Without mincing words, CBN’s inaction encouraged round-tripping.
Again, under its conditions, BDCs should never sell more than $5,000 to one customer. But this has not been the case, as stolen money running into millions or even billions of Naira is usually changed into dollars at BDCs, without a genuine profile of such customers being properly documented. This situation should have been brought under control by CBN, if it properly verified monthly returns submitted by BDCs.
It is not enough for CBN to stop the sale of forex to BDCs. It must do much more, especially ensuring that retail buyers of forex can access it at commercial banks. If the objective of this measure is to stem the slide of the Naira against foreign currencies, then CBN must ensure the measure does not entrench forex scarcity, as BDCs thrive if retail buyers cannot access forex at commercial banks. Also, CBN must effectively monitor the sale of forex by commercial banks, to forestall a situation in which bank officials service money launderers, as that would neutralise the objectives of restricting BDCs’ access to forex.
Emefiele’s ban on forex sale to BDCs is a good first step, but the apex bank needs to do more to halt the dangerous collapse of the Naira.
