By Omoh Gabriel
Last week in this column I said in there was no need to continue the sale of foreign exchange by the Central Bank of Nigeria to Bureau De Change in the country as it was no longer tenable. Little did I know then that the CBN was going to act fast on it. But before that evening press conference by the CBN Governor, I received several calls, some accusing me of working for some vested interest, while others were threats of possible reprisals. The curious thing is that some of the calls were from politicians who have been beneficiaries of the scam. The truth is that these are self serving individuals whose only interest is their pockets and stomachs.
From private investigation, operators of some of the BDC were in unholy alliance with politician to defraud the nation of its foreign exchange. At the height of the racket that was going on, Bureau De Change operators simply collect the passport of several individuals and use them as evidence of customers who purchase forex from them in making returns to CBN. But with the introduction of the Biometric Verification Number, a good number just relied on their political affiliates to do the needed documentation.
The question Nigerians should be asking is why should a business enterprise be established only on the basis that the government must supply its goods or raw materials, especially when the government does not make these products? Bureaux De Change were licensed to sell foreign currencies to Nigerians. The supply was from CBN. CBN does not mint foreign currencies. It only keeps it on behalf of the Nigerian people, the foreign currencies the nation earned and monetised. BDCs were buying foreign exchange from the CBN at N197 but sold at N270.
The actions of the operators defeated the purpose of government not willing to devalue the Naira. The strong value of the local currency intended by government in the interest of the economy and its citizens was not reaching Nigerians. It is as if the fuel subsidy saga was playing out again in the foreign exchange market. What value were these BDCs adding to the currencies they were selling? None! If BDCs were earning foreign exchange from their services and selling same at their own price, as is the case with exporters, it would have been a different story. The operators of Bureaux De Change simply used their privileged positions and access to power that be to rip off Nigerians.
If in the past there were sincere and genuine operators of BDC, the arbitrage opportunity between the official rate and the parallel market rate attracted many unscrupulous persons into the BDC business. According to CBN figures before the apex bank started selling foreign exchange to BDCs, there were only 74 operators in 2005. In the 10 years since CBN started foreign exchange sales to BDCs, the number has grown to 2,800 with 150 applications for licenses every month. CBN record showed that it used to allocate $8.6 billion to BDCs per annum. This amount could be put to better use and reallocated to raw materials, plants, equipment, fuel imports, BTA/PTA.
As of today, the economy is being starved of forex but operators of BDCs are smiling to their banks. They have long become centres of round tripping. A curious look at these BDCs showed that there are over 2,800 of them across the country, mostly owned by highly influential Nigerians. They were more than 5,000 before the CBN pruned down the number. They simply buy foreign exchange from the CBN for themselves. Those who are not keeping the foreign exchange purchased from the CBN at home are sending them out through neighbouring countries.
If these speculators are taken out of the market, the real forex need of Nigerians will drop considerably. It is abnormal that CBN is selling foreign exchange to BDCs. From available records, Nigeria is perhaps the only country in the world where the Central Bank sells foreign exchange directly to BDCs. Banks have long been known as financial intermediaries, individuals and corporate bodies direct their financial needs to banks. Through the banks there is usually appropriate documentation. Nigerians that are avoiding official channels complain of the rigour of documentation and seek refuge in BDCs.
If banks can cater for Basic Travelling Allowance of $1000-5000 of Nigerians, why should any true businessman not want to source his foreign exchange from the bank? It is simply for dubious reasons. The continued depreciation of the Naira is due to scarcity of foreign exchange in the market but there is huge amount of forex in the hands of currency speculators. Banks are finding it increasingly difficult to sell foreign exchange to those with genuine needs.
It is now a common knowledge that Nigeria earn over 90 per cent of its foreign exchange, from crude oil sales kept in the Central purse, known as external reserve, by the CBN . Nigeria earn dollar from sale of crude oil. This is converted into Naira and distributed among the three tiers of government. The dollar equivalent which is converted into Naira is kept in the reserve for those who need to buy things from abroad and who have reason to travel. But as times goes with rising inflation Nigerians with a bid to store value in a stable currency were increasingly buy forex from Bureaux De Change and storing them in their houses or their accounts.
They started making the Nigeria economy a dollar based economy. Prices were being quoted in dollars and local banks account were swelling with dollar denominated domiciliary accounts. This was sustainable while the prices of crude were high. The nation at the time had enough foreign exchange in its reserve and the impact of the activities of these unpatriotic Nigerians were not being felt.
Unfortunately for Nigeria oil prices have since collapsed and have fallen from an average of $116 per barrel in June 2014 to $32 per barrel in January 13, 2016, representing a decline of over 70 per cent. As if this is not bad enough, there are predictions that crude prices could fall as low as $10. If Nigeria does not embark on foreign exchange saving measures and the price crumbles to $10 per barrel, there will simply be nothing left in the foreign exchange reserve.
Data available in the CBN and The National Bureau of Statistics indicates that when oil prices were high, Nigeria was earning about $3.2 billion monthly, which were inflow into the nation’s external reserve every month. But as at January 2016, indications are that the foreign exchange inflow into the nation will be less than $1 billion monthly. This is a far cry from what the nation needs for its trade and investment.
What many Nigerians do not seem to know is that Nigeria’s import bill, which used to be N148 billion per month in 2005 is now about N920 billion. Nigeria is certainly in a very difficult position and is not in any good stead to fritter away what it has now in the name of few selfish individuals.
This government came into power with the mantra of change. If this change is to impact positively on the economy and thus the life of ordinary Nigerians, politicians and every Nigerian must come to terms that it can not be business as usual and given the difficult economic situation the nation is grappling with, the CBN must out of necessity prioritise the allocation of the scarce foreign exchange that is available to various groups/goods/services to save the economy from further deterioration.
Nigerians must be aware of the fact that the current BDCs scandal is much similar to the rise in number to the ugly situation that happened in the oil industry when the number of oil marketers rose sharply from under 20 to almost 150 in the height of the fuel subsidy scam.