BDC Operators Sabotage CBN, Naira Tumbles to All-Time Low

The Naira dropped to a record low of 305 per dollar at the black market on Wednesday as the new policy of the Central Bank of Nigeria (CBN) failed to lift the local currency.

Financial experts also warned of further depreciation of Naira, following the recent stoppage of foreign exchange sales to Bureau de Change (BDC) operators.

Some have also claimed that BDC operators are sabotaging CBN’s efforts as they do everything possible to stay on business at all cost.

As at the close of business yesterday, the Naira to 305 per dollar on the black market, two days after the CBN, stopped dollar sales to retail foreign exchange operators, including the BDCs.

The Naira, pegged at about 197 to the dollar on the official interbank market, sold between 292 and 305 at several bureau-de-change counters across the country, with fears that the rate may go higher as the days roll by.

Femi Ademola, executive director, Corporate Finance, BGL Capital Limited, told Newswatch Times that the discontinuation of the sale of dollars to the BDCs, which is estimated at between $1.47 billion to $8.6 billion per annum, would be used to meet some of the genuine demands for foreign exchange at the interbank market.

He said the policy would also allow the demand for school fees payment and travel allowances to be met at the interbank market.

He explained that based on the current development, the decision appears to be a wise one by the monetary authority to focus the official (interbank) foreign exchange market on meeting essential demands for international trade, while the non-essentials would be met at the autonomous and parallel markets.

“Although the development may see the exchange rate go up significantly in the autonomous and parallel market in the short term, I think it would stabilise after a while based on demand and supply.

“I think that since the long term strategy to manage the exchange rate is to completely float the currency, the development in the BDC market would be a good test-case for the eventually floating of the Naira exchange rate,” he noted.

Also Mr. Ayodeji Ebo, head of Investment Research, Afrinvest West Africa Limited, said the stoppage of forex sale to the BDCs meant that the CBN wanted everybody to apply to the banks for dollars.

He stated, “But we feel the pressure now will move from the BDCs to the parallel market. We will see significant spike in the value of the naira at the parallel market, because the little supply to the BDCs have also helped to cushion the demand at the parallel market.

“It will further compound or increase the spread between the parallel market and the interbank market. So, it will also increase round-tripping and unethical practices within the financial system.”

On the lifting of the ban on cash deposits into domiciliary accounts, Ebo said, “I am still sceptical about how this will work except they are also assuring us that if you deposit it, you can consummate business with it.”

Meanwhile, Alhaji Aminu Gwadabe, acting chairman, Association of Bureau De Change Operators, (ABCON),  said in a telephone chat that the currency traded against the greenback at 300, 290 and 292 in Kano, Lagos and Abuja a day after the CBN announcement.