CBN makes U-turn, directs banks to sell dollars to bureau de change operators

Godwin Emefiele

The Central Bank of Nigeria (CBN), in a bid to rescue the naira which continues its loss against major currencies, has directed agent banks to authorise international money transfer operators to sell foreign currency accruing from inward money remittances to licensed Bureau De Change operators (BDCs).

The directive was contained in a circular dated July 22, 2016 issued by the apex bank and pasted on its website.

This is a volte face for the apex bank which in January this year stopped the sale of foreign exchange to BDCs, asking them to source foreign exchange from autonomous sources “as part of measures to reduce the pressure on the nation’s foreign reserves.”

According to the circular with reference number TED/FEM/FPC/GEN/01/004, which was signed by the Acting Director, Trade and Exchange Department, Mr W.D. Gotring, the CBN took that decision as part of “continued effort to ensure the stability of the exchange rate and to encourage participation of all critical stakeholders in the foreign exchange market.”

The statement added, “All international monetary operators are required to remit foreign currency to the agent banks for disbursement in naira to beneficiaries while the foreign currency proceeds shall be sold to the BDCs.”

It stated also that “the foreign currency proceeds from the international money transfer sold to the BDC operators shall be retailed to end users in compliance with the provisions of anti-money laundering laws and observance of appropriate Know Your Customer (KYC) principles, including the use of Bank Verification Number (BVN).

“Furthermore, authorised dealers and BDCs are required to render returns of the operation daily and monthly to the Director, Trade and Exchange, CBN via e-FASS application, in accordance with extant regulation.

“For the avoidance of doubt, failure by any authorised dealers and BDC operators to render returns as and when due shall attract appropriate sanctions, including withdrawal of dealership’’.

CBN governor, Godwin Emefiele, while addressing a press conference in January to announce the discontinuation of sale of dollars to BDCs, had said, “Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws.”

According to the CBN governor, the apex bank resorted to this measure because it had noted that, “Whereas the CBN has continued to sell US dollars at about N197 per dollar to these operators, they have in turn become greedy in their sales to ordinary Nigerians, with selling rates of as high as N250 per dollar.”

The CBN governor also said, “BDC operators have abandoned the original objective of their establishment, which was to serve retail end users who need $5,000 or less. Instead, they have become wholesale dealers in foreign exchange to the tune of millions of dollars per transaction. Thereafter, they use fake documentations like passport numbers, BVNs, boarding passes, and flight tickets to render weekly returns to the CBN.”

But the measure, which was targeted at relieving the pressure on the currency and shore up its value vis-à-vis foreign currencies, achieved little as the naira continued its unrestrained fall against foreign currencies, exchanging at a point at the rate of N360 to the dollar.

This forced the CBN to adopt the liberalised forex market last month.

While announcing the new policy on June 15, Emefiele said the exchange rate would be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book. He, however, added that the CBN would participate in the market through periodic interventions to either buy or sell FX as necessary.

But in spite of the policy shift, scarcity of dollars has not allowed naira any respite as demand for dollars always outstrips supply with the effect that naira continued to be worsted by other currencies at both the interbank and parallel markets.