Tuesday, January 12, 2016

CBN Stops Forex Sales to BDCs, as Naira Hits N282/Dollar
By Hamisu Muhammad
Nigeria Daily Trust
Jan 11 2016

The Central Bank of Nigeria has stopped selling foreign exchange to Bureau de Change (BDCs) operators as part of a move to preserve the external reserves. This is just as the naira dropped to N282 a dollar at the black market.

The CBN Governor Godwin Emefiele announced  the decision  yesterday in Abuja. He however said the BDC operators are allowed  to source for forex from any other source that will not be contrary to the money laundering laws.

Emefiele said the apex bank can’t contain with the enormous challenges that face the reserves.

He said part of the reasons for the scarcity of forex was because the price of crude oil which contributes the largest share of Foreign Exchange Reserves dropped by over 70 per cent within the last one year.

Also the geopolitical tensions along critical trading routes in the world including between Russia and Western Powers, Saudi Arabia and Iran, etc have contributed to the crisis.

“The bank would henceforth discontinue its sales of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source.

They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws”

Meanwhile, the CBN governor said the banks are now allowed to accept forex deposits from their customers.

“The Bank would now permit commercial banks in the country to begin accepting cash deposits of foreign exchange from their customers.

Emefiele said the lifting of the sanction is to allow the banks to build liquidity of the forex and meet some of their demands.

In July last year, the CBN ordered banks to suspend accepting forex deposits from customers. Emefiele said the idea behind the banning of forex deposits before now was because of the dollarisation of the economy by many Nigerians.

Since the CBN began to sell foreign exchange to BDCs, the number of operators has risen from a mere 74 in 2005 to 2,786 BDCs today.

“More disturbing, though, is the financial burden being placed on the Bank and our limited foreign exchange.. This is a huge hemorrhage on our scarce foreign exchange reserves, and cannot continue especially because we are also concerned that BDCs have become a conduit for illicit trade and financial flows,” Emefiele said.

The net effect of these combined forces unfortunately is the depletion of our foreign exchange reserves. As of June 2014, the stock of Foreign Exchange Reserves stood at about US$37.3 billion but has declined to around US$28.0 billion as of today.

However, the acting President of the Association of Bureau De Change Operators of Nigeria (ABCON), Amuni Gwadabe said is not true that the BDCs are encouraging illicit trade as stated by the CBN governor.

Gwadabe said the CBN is just implementing part of the recommendations of the International Monetary Fund (IMF).

According to him, the decision will reduce the value of naira, increase the prices of goods and services and send many out of jobs.

“If you look at it, in Nigeria, we don’t produce anything; we only rely on imported goods and now all the sources for forex are blocked by the CBN”, Gwadabe said.

Meanwhile, the naira yesterday dropped to its lowest value of N282 a dollar at the parallel market even  before the announcement of the suspension of the Dollar auction.

Gwadabe said only God knows what will happen to the naira in the nearest future due to the policy

Read more at http://www.dailytrust.com.ng/news/business/cbn-stops-forex-sales-to-bdcs-as-naira-hits-n282-dollar/128429.html#7IgkVtugsYPIJ15x.99

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