By Obinna Chima
The Association of Bureau De Change Operators of Nigeria (ABCON) has appealed to the Central Bank of Nigeria (CBN) to take urgent steps to review the rate at which the dollar is sold to BDCs in order to boost ongoing recovery of the naira against dollar.
ABCON alleged that more than 700 BDC operators have in recent months been rendered inactive due to the new structure of the foreign exchange market.
President of ABCON, Alhaji Aminu Gwadabe, said in a statement at the weekend that the BDC business had been badly affected by “uncompetitive rate as the CBN sells dollars to BDCs at higher rate compared to what the regulator sells to commercial banks, yet both institutions target the same market segment and customers.”
However, a top central bank official who pleaded to remain anonymous, disclosed to THISDAY that the CBN Governor recently assured the forex dealers that he would look into their complaints.
Continuing, Gwadabe said the BDCs buy dollar from the CBN at N360/$1 and sell to end users at N362/$1 while the regulator sells to commercial banks at N358/$1 and the banks sell to end users at N360/$1.
The CBN’s approved list showed that 3,389 BDC operators have been licensed to carry out the business and are expected to get $40,000 allocations weekly from the CBN Forex Window. The apex bank disburses about $135.5 million to the 3,389 registered BDCs on weekly basis to sell to forex end users. The funds are needed for settling demands for Personal Travel Allowances (PTA), Business Travel Allowances (BTA), medical needs and school fees payment abroad.
According to the ABCON boss, “the banks enjoy large customer base with the customers able to carry out their transactions by having their accounts debited to cover the cost of purchase.”
He said “such convenience plus a lower rate put the banks at advantage position to attract more customers than BDCs.”
He lamented that “BDCs are not only buying at exorbitant rate, but also sell at a rate higher than that of the banks hence, creating low patronage for the operators.”
He said: “The success recorded by the CBN in stabilising the naira was largely contributed by the BDCs which remain backbone of the retail forex segment of the economy.”
“The CBN should be proactive enough to quickly review the BDC buying rate to ensure effective competition among all the stakeholders. There is no need to give the banks undue advantage over the BDCs as is currently the case based on the level of disparity seen in the dollar buying rate by both sectors. Nothing stops the CBN from ensuring that both the banks and BDCs buy dollars at same rate,” he added.
Gwadabe warned that the rate challenge faced by BDCs, if not checked, would trigger a liquidity crisis that may derail the ongoing recovery of the naira against the dollar. He said the BDCs will continue to support CBN’s determination to achieve exchange rate stability, and strengthen the value of the local currency against the dollar.
He said downward review of the BDCs rate “is critical at present, as it will keep operators afloat to meet increasing forex demand at the retail end of the market.”