• Standard Chartered engages CBN on resolution of N2bn fine
Financial market analysts have expressed divergent views over the ongoing raid on the offices and arrest of some Bureau de Change (BDC) operators by officials of the Department of State Services (DSS) in Lagos and Abuja.
While some of them argued that the move, which has the backing of the Central Bank of Nigeria (CBN), might be counterproductive, saying it might send the wrong signals and distort the relative stability in the foreign exchange (FX) market, others held the view that the action by the security agencies was needed to enforce compliance.
THISDAY had exclusively reported yesterday that security operatives from the DSS had raided the offices of some BDCs on Wednesday and arrested dealers for selling above the stipulated exchange rate.
But speaking in a phone interview yesterday, the Deputy Managing Director, Aquila Asset Management Limited, Oyelami Adekola, supported the action of the DSS, but urged the CBN to take steps to increase FX supply in the country.
“The BDCs collect money from the CBN and there is a guideline on how they are supposed to operate. So, if they are not operating the right way, there should be some form of checks.
“A lot of them have been overtly opportunistic with their pricing. So, for me, it makes sense. Some of them have even been hoarding the dollars they get from the CBN, which is bad.
“On the flip side, however, if they arrest the BDCs, what about the black market operators? Can they raid those ones? Can they control those ones? There could be ways whereby the BDCs might partner with the black market people if driven too far.
“Most of the FX policies, people have just been looking for ways to circumvent them, and that is because we are not doing enough to increase the supply of dollars as a nation. The country has to look for ways to increase FX supply because the demand is still huge,” he said.
A CEO of one of the leading investment banks in the country, who spoke on condition of anonymity, however, argued that using force to control the price of FX would not solve the problem in the market.
He recalled that similar measures were adopted in 1984 and they did not work.
“For anybody to think you can compel market prices by force, is something that irritates me. We are in the 21st century and it can’t work. When you want to control prices, you either do that by intervening on the demand side or supply side of the market.
“In the case of FX and the exchange rate, the CBN has tried all demand management strategies and has not been successful. That is because demand is still high.
“In 1984, I was a young boy then and I know that the use force to manage prices then only succeeded in pushing the product to the black market,” he said.
He urged the fiscal authorities to pursue policies that would help revive the economy and attract FX inflows.
While the spot rate of the naira on the interbank FX market closed at N306 to the dollar yesterday, as against N307 from the previous day, on the BDC segment, the nation’s currency traded around N390-N400 to the dollar.
On the parallel market, it maintained its previous day’s value of N460 to the dollar.
Meanwhile, following the fine of N2 billion imposed on Standard Chartered by the CBN, the international bank yesterday said it remains committed to complying with all local laws and regulations.
THISDAY reported yesterday that the bank drew the central bank’s anger for buying $25 million at the official rate and selling same way above the inter-bank market rate.
Apart from the hefty fine, the commercial bank’s treasurer was also said to have been suspended by the central bank.
But Standard Chartered, in a note yesterday, said: “In all countries, where Standard Chartered operates, the bank remains committed to complying with all local laws and regulations.
“In this matter, the bank continues to engage with the Central Bank of Nigeria officials in an effort to reach a resolution.
“As is the case with all our FX transactions, we believe this transaction is compliant with the applicable FX regulations and policies. We continue to engage with the Central Bank of Nigeria officials on this matter in an effort to reach an amicable resolution.”