The convergence of multiple foreign exchange (forex) rates, which begins with the recent unification of the Bureau de Change(BDCs) and banks’ dollar-buying rates, may signal the beginning of good things to come as expert has predicted a swell in the country’s Diaspora remittance due to this.
And just two weeks after the landmark event, the response of the market has been tremendous, with the Naira waxing stronger against the greenback. The policy has undoubtedly ended the frivolous dollar demand, exchange rate spikes, speculations, hoarding and rent seeking in the forex market.
The President of the Association of Bureaux de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, airing his views on the development, said the speed at which the Naira recovered against the dollar after the unification announcement buttressed the fact that the BDCs’ influence in the forex market and the economy can not be overlooked.
Before the review, the BDCs were buying dollars at N360 to a dollar and selling at not more than N361.5/$1, while the banks were buying at N357/$1 and selling at N360/$1.
But announcing the review, the spokesman of the Central Bank of Nigeria (CBN), Mr. Isaac Okorafor, said the decision was aimed at giving the BDCs a level playing field to enable them compete favourably with other authorised forex dealers.
This has won the bank a pat on the back: “We commend the CBN’s bold move in unifying the BDCs and 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,” said Gwadabe.
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 CBN.
Hammering on BDCs’ role in helping to stabilise the forex market, Gwadabe said the BDCs , over the years, have remained a potent monetary policy tool for exchange rate stability.
He added: “They have helped the government in creating over 30,000 jobs for Nigerians, thereby reducing the unemployment rate in the country. The BDCs have continued and will continue to make forex available to the critical retail end users thereby deepening forex access in the country. The BDCs have also been enhancing price discovery and transparency in the forex market. The operations of BDCs have equally raised the level of investors’ confidence and Diaspora remittances in the country.
“For instance, the World Bank data showed that Nigerians living abroad (Diaspora) sent home $22 billion in 2017, the highest in the Sub-Saharan region, and the fifth highest in the world. This represents 10 percent increase when compared with the $19.64 billion sent home in 2016,”
Gwadabe said the Diaspora remittance figures could double in few years if the CBN gives the BDCs all the necessary support as being requested.
“While we commend the CBN for reviewing the rate at which the dollar is sold to BDCs, thereby creating uniform competitive environment between the banks and BDCs, we also ask for a better regulation that gives BDCs more time to concentrate on their core business of making forex available to retail-end users and attracting huge investment inflows into the economy,” he said.
Meanwhile, to further deepen liquidity in the market, the BDC operators recently requested that CBN should approve disbursements of a portion of the Chinese Renminbi (Yuan) to them for onward transmission to their clients.
Gwadabe explained that this would enable them sell Personal and Business Travelling Allowances (PTA/BTA) to their 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.
The ABCON chief applauded the CBN for taking proactive measures in prosecuting the deal and the stability of the naira at the forex 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 added that 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.
The ABCON boss said BDCs would benefit from the swap deal, given that a stable and strong naira is good for the economy and operators.
To him, the increased use of Yuan in trade deals will also open a new business opportunity for BDC operators. “ABCON will continually support CBN in achieving its exchange rate stability mandate and promoting economic growth through increased global partnerships and collaborations,” said Gwadabe.
He added that the association is taking strategic steps to ensure that it benchmarks global best practices in currency dealings as seen in the ABCON co-ordination, automation and digitization projects.
The tough regulatory environment, including the N70 million licensing fee for BDCs being championed by CBN arepart of the concerns of ABCON. This fee, Gwadabe said, is not only outrageous, but has reduced the funds available to BDCsß to successfully run their operations.
The BDC 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 licensed 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.
The operators are also under obligation to render same returns to the Economic and Financial Crimes Commission (EFCC) /Nigeria Financial Intelligence Unit (NFIU), while at the same time reporting to otherstatutory government establishments, including the Federal Inland Revenue Service and Corporate Affairs Commission among others.