Why CBN banned forex sales to Bureau de Change operators

Key highlights from the MPC meeting

The Central Bank of Nigeria (CBN) announced after the Monetary Policy Committee meeting which was held between 26th and 27th of July that it has suspended the sales of forex to Bureau de Change operators stating that they have become agents that facilitate graft and corruption in the country.

The apex bank also stated that it has suspended the licensing of new BDC operators in Nigeria adding that it would channel the weekly forex allocations to commercial banks to sell to deserving Nigerians and businesses.

According to the CBN Governor Godwin Emefiele while addressing journalists at the end of the meeting he said “It is important for us to note that in line with the CBN Act, we have a mandate other than pricing and monetary stability to ensure we maintain the reserve of the country as well as the exchange rate of the country. Nigeria remains one and the only country selling foreign exchange to BDCs but because of pressure and requests, we have continued to do this to see that those who operate in this market are able to do so because we see it as an opportunity to create business for them.

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“We believe that as long as they do this, they do it to the benefit of the economy but we have become very disappointed and concerned about the activities of the BDCs in Nigeria. We are unhappy that rather than sell about $5,000 to travelers, they have turned themselves to agents that facilitate graft and corruption in Nigeria and we believe that this cannot be tolerated.

“The CBN has also been awash with complaints about the modus operandi of BDCs and it is becoming so disgraceful that we feel that at this stage we need to take a decision.

“There is evidence of prevailing ownership of several BDCs by the same promoters to procure multiple foreign exchanges from the CBN. Several international organisations, embassies patronise BDC through illegal forex dealers to fund their institutions.

“The Committee deliberated extensively on this, and this is an issue that even the authorities had engaged the CBN on and we tried our best to see how we could defend the BDC operators. Even our leaders who constitute political authorities have raised concerns about the modus operandi of  BDC operators in Nigeria. We did our best to defend them,  that they play certain roles in our economy.

“At this stage, we cannot no longer continue, we are carrying political authorities along because they themselves had wanted this to stop. Now that we can no longer continue because of the illegal activities, and corrupt tendencies exhibited by the players in the sector, we believe this must stop and we have stopped it henceforth.

“We know that there are some people who legitimately would want to go to them to buy dollars, we are saying they should go to their bank and validate minimal documentation and they will attend to you.   Indeed they will transfer your money electronically, in line with our cashless policy; they do not need to give cash. We cannot be talking about cashless naira and be supporting cash in dollars, an attempt to dollarize our economy.   We cannot continue with sharp practices that are going on there. If you know you have a legal transaction to make,   go to your bank, you do not need BDC given the form they were found in recent times.

“What happens in that (parallel) market as insignificant as the volume is, they are all perpetuating corruption, exchange of bribe money instead of taking naira in big bags, they choose to collect dollar in small bags, we will not facilitate that for you again, it is not what CBN should support.”

Meanwhile, the committee voted unanimously to retain the Monetary Policy Rate (MPR) at 11.5 per cent, the asymmetric corridor of +100/-700 basis points around the MPR,  retain the CRR at 27.5 percent,  and the Liquidity Ratio at 30 per cent.