By Obinna Chima
For years, closing the gap between the various rates in the foreign exchange (FX) market has been the target of the Central Bank of Nigeria (CBN).
That was why a recent move by the CBN in realising this objective by unifying dollar buying rates for banks and Bureau de Change (BDC) operators has been welcomed by operators in the FX market.
 The development which also helped in calming an emerging pressure in the market, according to analysts, showed the CBN’s proactive approach to ending multiple exchange rates as well as to ensure that speculative attacks don’t re-occur in the market.
The Association of Bureaux De Change Operators of Nigeria (ABCON) commended the CBN’s policy direction, saying the initiative would promote efficiency, transparency, price discovery and will help phase-out multiple exchange rates regime.
The CBN recently approved an upward review of the trading margin available to BDCs. The approval allowed BDCs to buy dollar from the central bank at N357/$1 and sell at N360, enabling them to earn a positive margin of N3 per dollar sold.
CBN Acting Director, Corporate Communications Department, Isaac Okorafor, said the decision was aimed at giving BDCs a level playing field to enable them to compete favourably with other authorised FX dealers.
Okorafor urged the BDC operators to abide by the new guidelines and not exploit eager customers by selling above the N360 band. He warned that erring BDCs would be sanctioned in any case of infraction established against them. Before the review, the BDCs were buying dollars at N360 to a dollar, while selling same to customers at no more than N361.5/$1 while banks were buying at N357/$1 and selling at N360/$1.
Therefore, Okorafor reiterated the CBN’s commitment to ensure that there is enough forex supply to genuine customers to achieve the rate convergence.
He said the CBN would continue to introduce measures to stabilise the FX market, adding that various initiatives it had introduced in the market were beginning to yield results with stability recorded in the naira exchange rate.
According to him, the recent move would also help to reduce pressure on the BDC segment of the market.
Okorafor urged all participants in the forex market to cooperate with the CBN and abide by the regulatory guidelines aimed at ensuring hitch-free operations in the market.
Also, the Deputy Governor of the CBN, Dr. Joseph Nnanna, had restated the resolve of the central bank to converge exchange rates in the economy.
According to him, the Investor’ and Exporters’ window was introduced the help the Bank “achieve the convergence†between the different exchange rates.
“If we achieve convergence, I don’t think the window will be necessary anymore because you’ll have one exchange rate for the economy,†Nnanna said.
CBN Governor, Mr. Godwin Emefiele also stressed that one of the objectives of the central bank was the rate convergence in the various segments of the market.
“As we entrench and sustain the transparency in the FX market, as FX reserves accretion continues, and market conï¬dence and improved sentiments remain, I expect that the exchange rate will not only be stable but would begin to appreciate against major currencies.
“The adverse competitiveness outcome which such appreciation may entail would be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined,†he had said.
He stressed the need for a re-doubling of the strong policy coordination, collaboration and cooperation between the monetary and fiscal authorities, which according to him, “flourished during the very difï¬cult times.â€
 “To sustain our recovery the need is greater now than ever for a robust policy coordination between the key aspects of economic policymaking space,†he added.
ABCON’s Position
The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, welcomed the initiative, saying the rate at which the naira recovered against the dollar after the CBN’s announcement, buttressed the BDCs’ influence in the market and economy.
He said the BDCs are key players in the forex market, where they remain major economic drivers creating employment and wealth for the people. These contributions, he said, require that the operations of BDCs be supported to sustain ongoing market rally and stability.
“We commend the CBN’s bold move in unifying the BDCs’, banks’ rates. We can safely say that the threat of distortions of market rate by election anxiety have been mitigated by the policy. And the BDCs are committed to supporting the CBN’s policy direction and actions to sustain ongoing market stability,†he said.
According to the ABCON boss, the impact of the rate unification is massive, including raising foreign investors’ confidence in the domestic economy, boosting the foreign exchange reserves position and creating opportunity for a better foreign reserve management by the apex bank.
He assured that him members would continue to meet the critical forex needs of the retail end-users and stick to allowable transactions limits as approved by the regulator.
Speaking further, Gwadabe described the development as reflection of the central bank’s commitment in achieving a single exchange rate regime.
He said ABCON had earlier expressed concerns about rate disparity and is now pleased with the review which will ensure transparency and stability in the forex market.
However, ABCON has further put up new requests before the CBN, which are meant to further deepen liquidity the market.
Following the implementation of the $2.5 billion currency swap agreement between the CBN and the People’s Bank of China (PBoC), ABCON had urged the CBN to approve disbursements of the Renminbi (Yuan) to its members to deepen the China-Nigeria swap deal.
Gwadabe explained that the approval would enable BDCs sell Personal and Business Travelling Allowances (PTA/BTA) to its customers in Yuan. According to him, the sale of BTAs and PTAs to China-bound businessmen would make them get used to the authentic features of the Yuan to avoid being issued fake currencies for transactions.
He commended the CBN for taking proactive measures in prosecuting the bilateral currency agreement, saying it would support the stability of the naira at the nation’s foreign exchange market. He said the currency swap deal was part of the CBN’s plan to keep the naira stable and protect the foreign reserves domiciled in dollars. He said the 15 billion Renminbi (RMB)/Yuan or N720 billion deal would provide adequate local currency liquidity for Nigerian and Chinese industrialists and reduce difficulties they face in searching for the greenback.
In addition, the ABCON boss pointed out that the tough regulatory policies and environment, including the N70 million licencing fee for BDCs being championed by CBN are also concerns to ABCON.
This fee, Gwadabe argued was not only outrageous, but has reduced the funds available to BDCs to successfully run their operations.
According to him, the BDC sub-sector is also facing other challenges such as multiple exchange rate, abnormal bank charges, Value Added Tax (VAT) and Commission on Turnover (COT), parallel market operators and illegal International Money Transfer Operators (IMTOs), porous international boarders, complex documentation requirements and poor capacity/ skills of operators.
“The increasing difficulties arising from over regulation and complex documentation requirements that licenced BDCs are facing in carrying out their daily legitimate operation is disturbing.
“These hitches have negative impact on BDCs’ ability to comply with statutory and regulatory requirements and have to be tackled by the apex bank.
“For instance, six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring. For instance, a BDC operator is expected to render daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator,†he said.
Furthermore, he said ABCON journey towards automation and digitilisation of BDC’s processes started in 2016 with the launch of our automation platform.
