The President, Association of Bureau de Change Operators in Nigeria, Alhaji Aminu Gwadabe spoke with Obinna Chima on issues surrounding the new FX policy, just as he urged the Central Bank of Nigeria to save the informal FX market from collapse
What role do you think BDC operators can play under the new forex system?
The role that the BDCs can play, we have always emphasised it. The BDCs have the network and distribution capacity, the convenience, potency and ability to serve the critical retail segment of the economy. The banks do not have the network to ensure that dollars circulate to the retail segment of the economy. Remember the BDCs are up to 3,000 in Nigeria, with wide network, far and wide. If you go to a lot of states, you can even count the number of bank presence, but you will always have BDC operators. If you fly into the country at 2am, at the airport, you will not meet any bank that is open for you to do your transaction.
If you want to buy $300, the banks may not look your way, which is why you need BDCs around you. From 2006 to 2015, the BDCs helped the CBN in converging the exchange rate between the official and black market because we are the ones that can trickle down the circulation of forex. We are real traders; we are not like banks that have idle naira. It is only when you have idle naira that you have the capacity to speculate or hoard currency. We all know that a lot of banks have idle funds, which they even take to the CBN. But the BDCs move the dollars into the market as they buy it. And this is not peculiar to Nigeria because the role of BDCs in other economies have been tremendous.
Go to India, BDCs provide nothing less than $30 billion to the through remittances alone. Algeria also has strong inflow of diaspora remittances. In the United Arab Emirate, the BDCs in Dubai alone provide the foreign currency cash need of banks. Go to Lebanon, their economy is highly dependent on the activities of BDCs as a result of diaspora remittances and all these things are packaged and rooted through the operations of BDCs and banks are not even involved.
Every time you attempt to make banks as primary market operators in the forex market, which is not supposed to be because in other climes, banks have nothing much to do with foreign exchange. They are either creating deposits or giving out loans. That is their traditional role in the economy. The CBN is the one that registered the BDCs and up till tomorrow continues to register BDCs.
But the central bank has said your members can remain in business, but just that you have to source for your forex. Is there an issue with that?
One of the sources BDCs get funds is diaspora remittance. This does not go to the forex reserves account because it is not part of oil proceeds. Last year, we had $21 billion of diaspora remittances and we expected that to move to $35 billion. Out of the $21 billion that was inflow, do you know that it was only $3 billion that was accounted officially? We asked the central bank to give us that money, by allowing the BDCs to be assessing it. Everybody is now happy with the single rate market structure and there is no unfair favouritism to say someone is buying at N197 and has the opportunity to sell as N300 as they have always alleged, so why are they still scared of the BDCs?
Are you members happy with the new forex policy that was recently introduced by the CBN?
We are comfortable with it because we believe it is going to generate liquidity, but we are not comfortable with it as long as it states that we cannot participate in that market. They said we can source for forex, but let us identify the sources of forex inflow into this country. In that market, if you look at the sources, they talked of the CBN supply, supply from international oil companies, international investors and export proceeds. So, which other source of forex is remaining for our members? The only one remaining is inflow from tourists. How many tourists come to Nigeria? Don’t forget, the BDCs have strong competitors, which are the black market operators.
So, which source are they saying? Do they want all of us to convert to black market operators? If care is not taken, that is what we would begin to see and that could lead to job losses, fake forex in circulation and other vices may come back. So, it is in their own interest to think outside the box to find a role for BDCs. We are the retail market makers and they cannot take that away from us. I have given you many instances. I listed almost six different sources that are in the market earlier.
They export proceeds; can I buy forex from exporters as a BDC? No! Someone in the diaspora wants to send money to his grandmother in Nigeria; I also will not be allowed to buy the fund. An investor from Ghana that has dollars and wants to invest in our stock market cannot come to me to sell the dollars. So, the only dollar I can buy is from tourist. What is the percentage of tourists in this country? Johannesburg alone generates over $3.5 billion annually from tourism, while Nigeria does not make up to $100 million from tourism. So, we have over 3,000 BDCs. So, we support the new forex regime because people would be more comfortable to bring in forex.
So how do you think the gap between the interbank and the parallel market can be bridged?
There must be a gap because already the 41 items that were excluded from accessing forex are to be funded from the black market. Also, you must understand that Nigeria is an import-dependent economy and this would continue to put pressure on forex. So, it is going to take time to that gap to be bridged.
Yes, we can achieve it, but it is going to take time. But the introduction of the BDC into the new system will definitely reduce that gap or eliminate it completely. It is easier to say it’s the BDCs that causes the spike, but BDCs have been totally shut from the market.
