The Central Bank of Nigeria, CBN and the Association of Bureau de Change Operators of Nigeria, differ on funding and blanket generalization of ABCON as dreadful
By Shedrack Ifurueze
The new regulations on foreign exchange, FOREX by the apex bank has brought to an end in the funding of BDCs on weekly basis. The CBN scheme that had been in operation for about 12 years has cost the apex regulator of the commercial banks nearly $9 billion annually based on more than $60,000 per regulator.
However, in the interim the CBN has permitted the commercial banks to start with immediate effect the acceptance of cash deposits of FOREX from their customers. The resolution, the CBN said is in line with ensuring that it is better it carries out its mandate effectively and efficiently, thus guaranteeing the preservation of the country’s insufficient cash reserves. The apex bank further said that this action is not intended to punish the BDCs and the operators.
But the operators, under the aegis of Association of Bureau de Change Operators of Nigeria, ABCON told the CBN that though, it welcomes the end of the programme, it would not accept the comprehensive generalisation of the association’s members as “bad eggs.” Aminu Gwadabe, acting president of ABCON, revealed that the action of the apex bank is tantamount to indirect way of devaluation of the naira. He said that the Nigerian currency is presently exchanging for N300 to the dollar and may soon be exchanged for as high as N400 to the dollar.
Gwadabe also noted that many of the BDCs Operators have only been unhappy as their total mandatory deposit to the CBN which is estimated to be N150 billion, only earned three per cent even as commercial banks have at various times earned only 11 per cent. Accordingly, in order to avoid further collapse of the country’s reserves, the CBN has also stated that it had taken a number of mixed actions, including the prioritization of the most critical needs for FOREX.
These include the provision of foreign exchange to matured letters of credit from commercial banks, importations of petroleum products, critical raw materials, plants/equipment and payments for school fees in that order. The CBN sells $600,000 to each BDC per week which translates to $167 million per week and nearly $9 billion in a year.
And in order to stop the country’s reserves depletion, the apex bank said it decided to reduce the amount of weekly sales to N10,000 per BDC which now translates into $28.4 million depletion of the FOREX reserve per week and $1.476 billion per annum. “This is a huge hemorrhage on our scarce FOREX reserves, and cannot continue because we are also concerned that BDCs have become a conduit for illicit trade and financial flows,” Godwin Emefiele, CBN Governor said.
With the current sharp fall in oil prices which depleted CBN’s monthly FOREX earnings from as much as $3.2 billion to current levels as low as $1 billion. Yet, the demand for FOREX by majorly domestic importers has risen significantly more than when the oil prices was hovering around $50 per barrel for a period of time in 2017.
The CBN boss said: “Our average import bill was N148.3 billion per month in 2005. In stark contrast, our average import bill for the first nine months of 2015 is 917.6 per month, though oil price are now not up to $40 per barrel. The net effect of combined forces unfortunately is the depletion of our FOREX reserves. By June, 2014 the stock of FOREX reserves stood at about $37.3 billion, but has declined to around $28.0 billion presently,” Emefiele said.
Meanwhile, Boniface Okezie, National Chairman, Progressive shareholders Association of Nigeria, PSAN, told the magazine that BDCs operators are in businesses and anyone who goes into business should be able to fund such business. He said that the CBN is not a father-Christmas organization that it should be funding the BDCs operators’ businesses.
Okezie added that for the oil companies such as Oando Plc, Texaco Nigeria limited and multinational companies like Nestle Nigeria Plc, Cadbury Nigeria Plc among others should be allowed to fund and source for FOREX in order to enable them import the needed raw materials for their products