Naira falls as CBN slashes dollar supply to BDCs

Dollar to Naira

The Naira is facing new pressure in the parallel market as it has depreciated to N473 per dollar, NAIJ.com can report this Monday, November 28.

But according to a report on Vanguard, the fall can be attributed to the decision of the Central Bank of Nigeria (CBN) to slash dollar sales to Bureau De Change (BDCs) by 46%.

It was gathered that last week, the CBN sold $8,000 to each BDC through Travelex Nigeria Limited.  This represents 46 per cent decline when compared to $15,000 usually sold per week to each BDC.

Confirming this development to Vanguard, Harrison Owoh, chief executive officer of H.J Trust BDC, said the reduction came as a surprise to the market.

He said this was contrary to the general expectation that the dollar sale will be increased to $20,000 per BDC.

“That is why the currency is under pressure with the rate going up,” Owoh said.

Also confirming the development, Taiwo Ebenezer, the chairman of South West Zone, Association of Bureau De Change Operators of Nigeria (ABCON), said that the reduction in dollar sales was done to accommodate BDCs in other zones of the country.

He said: “The dollar sales have been limited to BDCs in Lagos and Abuja, but ABCON recommended to CBN to find a way to accommodate BDCs in other zones. That is what the CBN has done though the reduction in supply in Lagos and Abuja has prompted the exchange rate to go up.”

He said that the CBN will definitely consider the impact on the rates and take a decision on whether to keep it at $8,000 per BDC across board or increase the quantity sold per BDC.

But despite the current pressure of the naira in the parallel market, operatives of the Department of State Securities (DSS) have intensified raids on illegal currency traffickers in Lagos and Abuja.

This has further pushed BDC operators in the parallel market into hideout.

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A top BDC operator said on the condition of anonymity: “They now come regularly to locations where these people usually operator from. About five of them (DSS operatives) recently visited this area but they didn’t come into the offices of licensed BDCs. They are targeting the unlicensed and illegal operators. But everybody is careful now.

You only deal with people you know except where they have their documentation. The only problem is that it is difficult to get the exchange rate that reflects the true position of the market. People quote different rates depending on the person they are dealing with and the source of the dollar. That is how we now operate.”

Meanwhile, the CBN recently justified the raid on illegal currency traffickers. According to the CBN governor Godwin Emefiele, the nation’s foreign exchange laws forbid street trading of foreign currency.

Addressing the press at the end of the meeting of the Monetary Policy Committee (MPC), said that the DSS had the right to enforce the law and make sure that currency hawkers were forced out of the “illegal trade.”

The governor, who said it was demeaning for traders to hawk currency on the streets, urged the traders to legalise their business by applying for Bureau De Change (BDC) license.

In the communiqué issued at the end of its meeting the MPC called on security agencies to sustain the raids, saying: “The MPC believes that the security agencies should sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market.

“The Committee reiterated that the extant foreign exchange regulation outlaws the trafficking of currency on the streets as some unlicensed operators currently do. Thus, to evolve an appropriate Naira exchange rate that stabilises the foreign exchange market, BDC operators must strictly observe the terms and conditions of their licence.”