CBN lifts ban on dollar deposits, withdrawals
AS exclusively reported by Daily Sun on Monday, the Central
Bank of Nigeria (CBN), yesterday lifted its ban on foreign currency deposits
and withdrawals by customers from comercial banks.
This is coming as it also embargoed further foreign currency
sales to Bureau de Change (BDC) operators. Daily Sun had on Monday, hinted that
the apex bank might relax some of its policies in respect of domiciliary
account following constraints Nigerian bank customers are having making foreign
currency related transactions from their bank accounts.
The apex bank also decided to provide the available but
highly limited foreign ex- change to meet matured letters of credit from
commercial banks for importation of petroleum products, critical raw materials,
plants, and equipment, and for payments of school fees, BTA, PTA, and related
expenses.
Addressing newsmen yesterday, in Abuja, CBN Governor, Godwin
Emefiele said it took the decision fol- lowing recent developments in the
nation's foreign ex- change market and to arrest the continued depletion of the
reserves.
"We have continued to observe that stakeholders in some
of the subsectors have not been helpful in this direction. In particular, we
have noted with grave concern that Bureau de Change (BDC) operators have
abandoned the original objective for their establishment, which was to serve retail
end users who need US$5,000 or less. Instead, they have become wholesale
dealers in foreign exchange to the tune of mil- lions of dollars per
transaction'' he said.
Emefiele lamented that the situation has gone so bad that
operators of the BDCs now use fake documentations like passport numbers, BVNs,
boarding passes, and flight tickets to render weekly re- turns to the CBN.
"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'', the governor, said.
He noted a situation where the apex bank has continued to
sell US Dollars at about N197 per dollar to these operators, and they in turn
sell to ordinary Nigerians, at rates as high as N250 per dollar.
According to him, given this rent-seeking behaviour, it is
not surprising that since the CBN began to sell foreign ex- change to BDCs, the
number of operators have risen from a mere 74 in 2005 to 2,786 BDCs today
adding that the CBN receives close to 150 new applications for BDC licences
every month.
"Rather than help to achieve the laudable objectives
for which they were licensed, the bank has noted the following unintended
outcomes: avalanche of rentseeking operators only interested in widening
margins and profits from the foreign exchange market, regardless of prevailing
official and interbank rates; potential financing of unauthorised transactions
with foreign exchange procured from the CBN, gradual dollarization of the
Nigerian economy with attendant adverse con- sequences on the conduct of
monetary policy and subtle subversion of cashless policy initiative; and
Prevailing ownership of several BDCs by the same promoters in order to
illegally buy foreign currencies multiple times from the CBN. The governor said
that more disturbing, though, is the financial burden being placed on the bank
and its limited foreign exchange.
"The CBN sells US$60,000 to each BDC per week. This
amount translates to US$167 million per week, and about US$8.6 billion per
year. In order to curtail this reserve depletion, we have reduced the amount of
weekly sales to US$10,000 per BDC, which translates into US$28.4 million
depletion of the foreign reserve per week and US$1.476 billion per annum'' he
said.
He described such operations as a huge hemorrhage on the
nation's scarce foreign ex- change reserves, and cannot continue especially
because BDCs have become a conduit for illicit trade and financial flows.
The apex chief noted that in view of the above, the
management of the Central Bank of Nigeria has reached the following decision,
which take immediate effect: that the Bank would henceforth, discontinue its
sales of foreign exchange to BDCs. ''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'' he said, adding that CBN would now permit commercial banks in the
country to begin accepting cash deposits of foreign exchange from their
customers.
CBN's action'll lead to 12000 job losses -BDAN
Meanwhile BDC operators have said the latest move by the
apex bank will see the value of the naira hitting N300 to the dollar before the
end of the week even as an estimated 12,000 would be on the line.
Reacting to the CBN announcement yesterday, the acting
president of the Association of Bureau de Change
Operators of Nigeria (AB- CON) Aminu Gwadabe, in a telephone
interview with said if the CBN decision is not well managed, "I see the
dollar reaching N300 before the end of the week.
He noted that this would in turn lead to a "cost
inflation" as the country is an import dependent economy, importing almost
all its needs. Asides this, he said many BDCs will be forced out of business
leading to job losses in the sector.
He noted that on the average, each BDC employs four persons,
adding that about 12,000 jobs could be lost as a result of the CBN's action. He
explained that BDCs have limited sources of foreign exchange and had to rely on
the CBN window.
"In other economic BDCs don't have access to the
central bank window because they have other sources of forex to them which
includes banks but in Nigeria banks are being restricted from selling to BDCs,
exporters can also patronise BDCs in other country's but here it is being
restricted. These are some of the issues."
He then urged the CBN to review downwards the N35 million
cautionary deposit mandated for BDCs as ac- cording to him, "this has tied
down the capital of many BDCs and to get other source of foreign exchange we
need capital."
He also noted that the move by the CBN will further en-
courage activities of street hawkers and illegal foreign exchange operators
"because most people will say why do I have licence since I don't have
access to the CBN window, so I better operate as an illegal operator.
This he said will make it impossible for the apex bank to
monitor the outflow and inflow of forex into the country and what the forex is
being used for.
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