By Henry Boyo

In January 2016, the CBN announced that it had stopped, with immediate effect, the sale of foreign exchange to Bureau de Change (BDCs), so as to reduce pressure on Nigeria’s foreign reserves. The CBN Governor, Godwin Emefiele, has therefore directed BDCs to henceforth source forex from the autonomous market.

CBN Governor, Mr Godwin Emefiele

In defence of the new policy, Emefiele observed that “despite the fact that Nigeria is the only country in the world where the central bank sells dollars directly to BDCs, operators in this segment have not reciprocated the bank’s gesture to help maintain stability in the market.

Instead, these operators have allegedly become greedy by selling dollars they bought from CBN for N197 at rates as high as N250/$. Given this rent-seeking behaviour, it is not surprising that …. the number of BDC operators has risen from a mere 74 in 2005 to 2,786 today.”

The BDCs were also fingered as potential financiers of unauthorized transactions with foreign exchange procured from the CBN while also decried their odious role in the “Gradual dollarization of the Nigerian economy, despite the attendant adverse consequences on monetary policy management and the subtle subversion of the cashless policy initiative”. Regrettably, chains of BDCs were also allegedly created by same owners, in order to “illegally buy foreign currencies multiple times from the CBN.”

Consequently, Emefiele, has described the insatiable appetite of BDCs for forex as “a huge hemorrhage which cannot be sustained on our scarce foreign exchange reserves, especially when BDCs have become a conduit for illicit trade and financial malpractices.”

However, barely 6 months after the above disturbing observations, the CBN’s circular titled “SALES OF FOREIGN CURRENCY PROCEEDS OF INTERNATIONAL MONEY TRANSFERS TO BUREAUX DE CHANGE OPERATORS of 22/07/2016, inexplicably states as follows:

“In the continued effort to ensure the stability of the exchange rate and to encourage participation of all critical stakeholders in the forex market, authorized forex Dealers …. are hereby directed to sell foreign currency accruing from inward money remittances to licensed BDCs with immediate effect.”

“Furthermore, all International Money Transfer Operators are now required to “remit foreign currency to agent banks for disbursement in Naira to beneficiaries, while the foreign currency proceeds shall be sold to BDCs”, so long as they complied with the existing provisions of the Anti-Money Laundering Laws and also observed the appropriate KYC Banking principles.”

In retrospect, however, let us backtrack to March 2006, when the incumbent CBN Governor, Prof Chukwuma Soludo confirmed, in a press briefing, that a Wholesale Dutch Auction System (WDAS) had been established to replace the existing Retail equivalent (RDAS) so as to make foreign exchange management more efficient and effective.”

Although, WDAS, according to Soludo, had improved the efficiency of the forex market and facilitated the convergence of the interbank and the official rates”, however, “the increasing divergence between the interbank/official and the BDC/parallel market rates” had become very worrisome. Incidentally, Soludo fingered the heavy demand of forex to fund the smuggling of a long list of banned imports as a major reason for this disparity in market rates.”

Consequently, Emefiele had resolved “to ensure forex supply to all markets so as to reduce demand pressure in the parallel market, by reviewing or eliminating many of the restrictions imposed on users of the official market, so that hitherto ineligible transactions in the official market will become eligible, and thereby reduce pressure on the parallel market!!!”

In plain language, Soludo had decided to throw Nigeria’s relatively scarce, valuable dollar reserves at BDCs despite his admission that the major patrons of BDCs were those whose activities were inimical to the Nigeria economy; i.e. money launderers and smugglers!

In my article titled “Cheaper Black Market Dollars”, in the Vanguard Newspapers, of 17/7/06, I observed that this “approach to reducing the gap between the parallel market and official rate is akin to smashing a cockroach on a glass table with a sledge hammer!!  In retrospect, it seems the cockroach got away as the gap between the black market and official rate is currently at its widest ever, meanwhile, the shattered glass has regrettably inflicted serious injury on everyone.”

The following is a summary of another article titled “CBN Stop This Nonsense”, (See www.lesleba.com 3/2009); the narrative reflects the CBN’s counterproductive impulsive tradition in the forex market. Please read on:

“The Apex bank has since released further details of its ‘easy dollar’ project, even though the raison d’etre and framework exposes serious contradictions from the promise of improved social welfare and national economic regeneration.  Curiously, the inspiration for the new ‘easy dollar’ regime came from our ‘friendly’ foreign creditors ‘the Paris Club’.  According to Dr. Mailafia, a CBN Deputy Governor, the Paris Club demanded the implementation of an ‘easy dollar regime’ as a precondition for their widely condemned spurious debt relief to Nigeria.”

“Nevertheless, the spectre of oil prices approaching and exceeding $80/barrel before year end will seriously concern the IMF, with the Paris and London Club affiliates. However, their points men are strategically stationed in the CBN and Finance Ministry to ensure that the considerable export revenue increase, from rising crude oil prices, for countries like Nigeria, will sooner than later return to bank accounts in Europe through the ample opportunities deliberately created by the allegedly ‘progressive’ and liberal government policies which will inevitably facilitate capital flight.

It is no secret that the IMF and affiliate institutions currently pay the salaries of critical members of our government’s economic team (including the finance minister) and we must remember that he who pays the piper dictates the tune.”

“What is clear from the IMF-induced CBN guidelines on forex liberalisation is that our monetary authorities have once more positioned the resources of our nation for capital flight and the renewed accumulation of spurious foreign obligations; unfortunately, these debts will once more balloon unnoticed for some time until our ‘benevolent’ overseas creditors rehash a new cycle of economic restructuring with another set of IMF schooled monetary wizards, once more embedded in our treasury to ensure we never become a competitive economy.”

“Indeed, in response to the popular demand of IMF and its International affiliates and in a fine example of profligacy, the Apex bank will now supply each registered BDCs with $200,000 twice weekly for onward sales to itinerant customers, in a fruitless attempt to bridge the N20/$ gap between official and parallel market rates.

There is no evidence that this level of freedom exists in the forex market anywhere in the world; indeed, if 300 registered BDCs enjoy CBN’s ‘dollar party’, Nigeria’s reserves will fall by almost $300m monthly!”

SAVE THE NAIRA, SAVE NIGERIANS!