Banks decline to sell $50,000 to BDCs despite CBN’s directive •Apex bank directs dealers to dedicate 60% of forex purchases to manufacturers

 •Only 10% of Lagos BDCs got forex

Deposit Money Banks (DMBs) are yet to comply with Central Bank of Nigeria (CBN) directive to sell $50,000 from Diaspora remittances to bureau de change (BDCs) on weekly basis.

President, Association of Bureau De Change Operators of Nigeria (ABCON) Aminu Gwadabe on Monday revealed that only 10 per cent of BDCs from the Lagos market have accessed dollar from banks since the CBN gave the directive of resumption of dollar sales nearly three weeks ago.

The banks that are so far  involved in the dollar sales include FirstBank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa and Unity Bank. Others are Diamond Bank, Zenith Bank and Stanbic IBTC Bank.

Gwadabe regretted that BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu are yet to get a single dollar from these banks.

He said that the BDCs are also selling the dollar between N345 and N355 to dollar, far above the interbank rate of N305 to dollar exchange yesterday. The banks, he added, are supposed to sell to the BDCs on the same day within the week, but have failed to do so. “Instead of staggering the payment, the banks should sell to the BDCs on the same week day, so that the impact will be felt in the market. We also want the CBN to licence new International Money Transfer Operators (IMTOs) to deepen the market.”

“Our members across the country have funded their accounts since two weeks ago but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks,” he said.

Gwadabe therefore called on the CBN to outsource the dollar distribution role to independent distributor since the banks have failed in their assigned role.

“I think the banks are compromising the policy and CBN’s directive on the matter. And like I said earlier, since the banks are not co-operating, I expect the CBN to take that role from them and assign it to a reputable independent distributor,” he said.

The CBN had directed through a circular to authorised dealers that all agents to approved IMTOs sell foreign currency accruing from inward money remittances to licensed BDCs.

It said the foreign currency proceeds of IMTOs sold to BDC operators shall be retailed to end users in accordance to CBN regulation. Also, only BDCs that have been cleared by the compliance department of the banks as fully compliant with the Know Your Customer (KYC) requirement were allowed to buy. The CBN issued a follow-up circular to all the banks, asking them to sell $50,000 weekly to BDCs.

The directive was meant to ensure stability of the exchange rate and encourage participation of critical stakeholders in the foreign exchange market.

The CBN said a BDC shall nominate its preferred authorised dealer, a commercial bank, and can only procure the said amount from only that bank of its choice in a week. The CBN warned that any breach of this condition will attract appropriate sanction.

Speaking further on the Diaspora remittances, Gwadabe said: “The proceed of the international money transfer fund, is not CBN money. It is not from the foreign reserves of the CBN. This is money that Nigerians in Diaspora, are sending into the economy. Before, this money come through unofficial means, some sending through hands, and at the end of the day, the beneficiary will not even get the money”.

Meanwhile, the CBN has directed all authorised foreign exchange (forex) dealers and the general public to ensure that at least more than half, or 60 per cent of their total forex purchases from all sources (interbank inclusive) are channeled to end users strictly for the purposes of importation of manufacturing raw materials, plants and machinery.

The balance of 40 per cent CBN said, should be used to meet other trade obligations, visible and invisible transactions.

In circular to all authorized dealers obtained in the bank’s website on Monday, signed by the Acting Director, Trade and Exchange Department CBN, W.D. Gotring the apex bank said the review of returns on disbursement of foreign exchange to end users showed that only a small proportion of forex sales are being channeled towards the importation of raw materials for the manufacturing sector.

The bank also insisted that Authorized Dealers should continue to publish weekly sales of foreign exchange to end users in the National Newspapers and render statutory returns on same to the CBN promptly.

Similarly, in a separate circular titled “Transactions in ‘free funds’ by Authorized Dealers,” and signed by the same Acting Director, the apex said it has noticed that some Authorized Dealers have continued to buy and sell forex known as “free funds,’ despite the provision of the circular referenced TED/AD/29/2004 dated March 4, 3004 on the subject.

To this end, CBN warns that dealing in forex without appropriate documentation which includes “relevant entries, blotters, physical documents and non-disclosure to the Regulatory Authorities are a breach of extant regulations.”

The Central Bank of Nigeria (CBN) has threatened to suspend banks found involved in “free funds” and hidden transactions without its knowledge.

It should be remembered that CBN had in 2004 threatened to sanction banks that engage in ‘free funds’ transactions, brokerage activities and unorthodox use of travellers’ cheques in a manner that is against the rules guiding the foreign exchange market.

“The CBN therefore reiterates that, as provided in the laws and regulation governing dealings in foreign exchange, Authorized Dealers shall NOT sell foreign exchange without appropriate documentation and disclosure to the Regulatory Authorities irrespective of the source of such funds.

“Accordingly, Authorized Dealers shall deal in eligible transactions only and not to engage in any foreign exchange transactions on terms inconsistent with the extant laws and /or regulations.” The circular read in part.

Meanwhile, the Naira on Monday strengthened at the official interbank market as N7.82 after settling at N308.73 to the dollar compared to  at N316.55 posted on Friday.

Traders said the central bank selectively sold dollars to commercial lenders just before the market close.

“The central bank came to the market toward the close, and sold dollars to only few banks, which helped to support the naira,” a trader said

Other traders at the market expressed hope that the local currency would continue on this recovery trajectory as more and more banks sell foreign exchange to Bureau De Change (BDCs).

At the parallel market the local currency hovered between N397 to the U.S. currency,  from N394 it posted on Thursday, while it traded at N505 and N442 to the Pound Sterling and the Euro, respectively.