Financial experts in the country have been reacting to the Central Bank of Nigeria (CBN) decision, banning the sales of forex to Bureau De Change (BDCs) operators and instead released a total of $200 million to all commercial banks operating in the country.
The CBN’s release is part of the effort to mitigate the impact of the massive decision and clampdown on BDCs as Naira further fell against the American dollar at the parallel market hours after the decision to ban sales of forex to BDCs was announced.
The CBN Governor, Godwin Emefiele, had announced the end of forex sales and new licenses approval after the Monetary Policy Committee two-day meeting in Abuja on Tuesday.
Emefiele hinged the decision on the discovery by the apex bank that BDCs have become the channel for all forms of illicit financial flows in the country, including money laundering.
According to him, the BDCs have been making huge profits while Nigerians suffered in pain.
He also added that only the CBN will now channel “significant allocation for foreign exchange to banks to meet legitimate demands for Forex.
“All commercial banks have been ordered to create teller points in their branches to pay out Forex to customers without any hindrance so long as the customer presents the minimum requirements,” Emefiele had stated.
Meanwhile, few hours after the announcement naira fell slightly to the dollar.
According to naijabdcs.com, the official websites of the BDCs, the naira which had previously exchanged at N504 per one dollar, Tuesday evening, hit about N510 on Wednesday, representing N6.00 difference/devaluation.
The CBN boss had revealed that there are about 2,786 BDCs in the country. According to financial experts, the decision by the CBN to stop sales of forex to BDCs in the country would have a huge impact as it could lead to scarcity of forex.
Reacting, an Economist and former Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, attributed the decline of Naira value to the CBN’s policy choice of a fixed exchange rate regime and administrative allocation of forex.
According to Yusuf, the decision of the CBN to ban forex sales to BDCs is not a good idea, saying that the apex bank is only tackling the symptom rather than finding a sustainable solution to the illicit financial flows in the country, among other illegal acts perpetrated by the BDCs.
In his words, “It is a policy regime that has created a huge enterprise around foreign exchange – round tripping, speculation, over invoicing, capital flight etc.
“The action of the apex bank amounts to tackling the symptoms rather than dealing with the causative factors, which is not a sustainable solution.
“It is regrettable that the CBN does not believe in the market mechanism. Yet market systems are time tested as instruments of efficient resource allocation in leading economies around the world.”
“Moving retail forex transactions from BDCs to the banks was like kicking the can down the road. The same issues would manifest even with the banks.”
However, a former President, Association National Accountants of Nigeria, Dr Sam Nzekwe hailed the decision of the CBN.
Nzekwe said the decision of the CBN to halt the sale forex to the BDCs was not a bad idea. He added that BDCs need to source their monies themselves because they were doing illegal dealings with the privilege.
In his words, “BDC is meant for light travellers, someone that is travelling and has no time to go to bank who can just stop over at the airport and buy few dollars and travel with it. The CBN was allocating forex to them which was a wrong decision and it is a terrible thing. That is why they encouraged round tripping.”
Also, economist and a former presidential candidate, Prof Pat Utomi, argued that the forex ban will have negative impact on the country’s economy.
According to him, the ban will likely allow hoarding of dollars, which would further lead to the depreciation of naira.
In his words, “I think the bottom line is that there is already a challenge to people who are exporting. Foreign exchange is already scarce right now, even for people buying basic travel allowance.
“The real issue is simple. We are not earning as much foreign exchange as we are using. So, we are running the risks of depleting reserves and endangering trades long term. So, there is the pressure to better manage foreign exchange.
“What this ban signals is that there is a foreign exchange crisis. This signal will lead to more hoarding, and lead to a spiral that can make the exchange rate deteriorate much faster because there may not be enough supplies to keep the market reasonable.
“So, prices are going to tumble. People are talking about the one thousand naira to a dollar. God forbid that it happens so quickly but it can happen.”