THE INSIDER: CBN allocated $5.7bn annually to BDCs amid plunging reserves

At the end of the monetary policy committee meeting in Abuja on Tuesday, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), announced the discontinuation of foreign exchange sales to Bureaux De Change (BDCs) operators.

BDCs are registered businesses licensed by CBN to carry out small scale FX businesses in Nigeria on a stand-alone basis.

Emefiele said the decision was based on BDC operators’ involvement in illegal financial flows and money laundering in Nigeria.

He added that there is evidence of prevailing ownership of several BDCs by the same promoters to procure multiple FX from the central bank.

$5.72bn ANNUAL FOREX SALE TO BDCs

A top insider at CBN told TheCable on Tuesday that the apex bank allocates about $20,000 weekly to each BDC operator in the country. With 5,500 BDC operators in the country, the figure translates to an annual allocation of $5.72 billion to the parallel side of the foreign exchange market.

“Commercial banks come with bids of $1.3 billion fortnightly, and CBN cannot provide more than $250 million,” the source said.

The top insider said there are 500 new applications every month.

SHORTAGE OF FX

The source added that the apex bank may be unable to meet requests of banks to serve all customers as mandated.

Speaking further at the end of the MPC meeting, Emefiele said commercial banks have been mandated to set up a desk to serve customers.

“They want to meet as much demand as possible for medicals and school fees,” the source added.

“NNPC has not remitted one dollar since the middle of April. They say they spent everything on subsidy.”

Checks by TheCable show that the country’s foreign reserves declined by $2.33 billion this year.

The external reserves moved from $35.64 billion in January 2021 to $33.32 billion as of July 26.

In May, the World Bank said Nigeria’s diaspora remittance flows declined by 27.7 percent in 2020 – pushing remittances in Sub Saharan Africa (SSA) down by 12.5 percent.

DISCONTINUATION OF FX SALE. NOT THE FIRST TIME?

This is not the first time CBN will be moving hard on the BDC operators over some infractions. In 2016, the apex bank had also accused the BDCs of “gradual dollarisation of the Nigerian economy”.

“In particular, we have noted with grave concern that Bureau de Change (BDC) operators have abandoned the original objective of their establishment, which was to serve retail end users who need US$5,000 or less,” CBN had said.

“Instead, they have become wholesale dealers in foreign exchange to the tune of millions of dollars per transaction. Thereafter, they use fake documentation like passport numbers, BVNs, boarding passes, and flight tickets to render weekly returns to the CBN.”