operators halt funding dollar accounts at CBN
Most Bureau De Change (BDC) operators across the country have stopped funding their dollar ac-counts with the Central Bank of Nigeria (CBN) as the apex bank’s forex reforms exert maximum pressure on BDCs operations, investigation by New Telegraph has revealed.
The CBN, as part of strategic measures designed to stabilise the naira against the greenback, a few months ago, began direct sale of dollars to banks for onward sale to key segments to ease the scarcity dollars. The apex bank has injected over $7 billion into the forex market within the spate of six months.
Speaking on the development, a BDC operator in Abuja, Mallam Usmah Abdullahi, told New Telegraph that BDC operators’ fortunes have nose-dived drastically.
He said most BDCs have stopped funding their dollar accounts with CBN.
“BDCs operators are not funding their accounts because we are not happy. The CBN is giving us a dollar at N360 and we are selling at N362. If you deduct all the expenses – pay bank charges, pay your cashier and pay for returns, you are left with losses.
“CBN should reduce the official rate it sells dollars to BDCs. The bank sells dollars to commercial banks at N305 to a dollar and sells N360 to BDCs, it doesn’t augur well for our business,” said Abdullahi.
Another operator, who elected to be anonymous, said he has stopped funding its dollar accounts with the apex bank.
“I can’t be bidding at a loss while my bills keep piling up. So, I have to stop funding my account with CBN,” he said.
Similarly, a Lagos-based BDC operator, Mr. Mathew Omoregie, said: “Many BDCs no longer participate in the weekly forex bid sessions because clients are no longer coming forward to buy dollars from us as frequently as they used to do in the past.
“The reason is not just that the CBN is flooding the market with dollars, but it has to do with the fact that it (CBN) is selling dollars at a discount to the banks, thereby making it possible for the banks to sell at the N360/$1 rate that the BDCs buy from the CBN.
“Of course, since we buy at N360/$1, you don’t expect us to sell at the same rate to our clients; otherwise we won’t be in business. So what is happening now is that many of our clients now prefer to buy at a cheaper rate from the banks,” he stated.
He disclosed that BDCs have urged the CBN to review the rates at which it sells forex to BDC operators to enable them to compete with banks, but that the apex bank was yet to grant their request.
Another Lagos-based BDC operator, Mr. Morrison Okoye, revealed that he recently had to ask two of his staff to stop coming to work until business improved.
He said: “Things have been really tough since February this year when the CBN introduced new measures to liberalise the forex market. Apart from the fact that the frequent dollar injections into the market by the CBN have made forex easily available for people who need BTA, PTA and to import goods, it has also made it more difficult for BDCs to compete with banks who are selling forex at a cheaper rate.”
He disclosed that unlike a few months ago when many BDC operators used to quickly sell off the $40,000 they get weekly from the CBN, a few clients were turning up these days to buy dollars.
The same tale of woe emanated from Owerri, the Imo State capital. Former chairman of Owerri BDC operators under the cooperative name, Igwebuike Traders Union, Mr. Anselem Nwagu, told New Telegraph that the CBN’s forex measure is adversely affecting their operations.
BDC operators in Port Harcourt, the Rivers State capital, said they are unhappy over the CBN’s recent forex measures.
According to them, the measures have made it extremely difficult for them to profit from the business.
About 90 per cent of the operators in Port Harcourt carry out their operations beside Hotel Presidential, along Aba Road. Those who spoke to New Telegraph complained of declining business opportunities, which they blamed on CBN’s policy.
Yunusa Girei said that they mainly survive through direct purchase of foreign currencies from customers who either have relations abroad or who work with expatriates who pay them in foreign currencies.
He said: “We are in a tight corner with the way the CBN handles foreign exchange. The official CBN rate has forced some people I know out of business. These are very small players, whose masters struggle to survive.”
President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe had, last month, alleged that more than 700 BDC operators had, in recent months, been rendered inactive due to the new structure of the foreign exchange market.
According to him, 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.”
Gwadabe explained that BDCs buy dollars 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.
Reflecting on forex intervention by the apex bank, the CBN governor, Mr. Godwin Emefiele, has repeatedly maintained that the intervention has restored confidence in the economy.
Mr. Isaac Okorafor, the Acting Director, Corporate Communications Department of the CBN, stated that the apex bank would continue to increase liquidity based on genuine demands in the market to enhance forex stability.
He reminded Nigerians that the CBN has kept faith with its resolve to sustain liquidity in the forex market and that the bank had ensured that pressure on the market was removed by its continuous interventions.