All
over the world there are BDC operators and they play different roles. For
instance, the primary role of BDCs globally, according to the Association of
Bureau De Change Operators of Nigeria (ABCON), is to ensure forex availability
to the critical retail sector of the forex market in terms of supply, to bridge
the gap between the official and the parallel market exchange rate. The
operators said they have even gone beyond ensuring rate convergence and
providing liquidity, to the achievement of the major policy of the CBN, which
is exchange rate stability.
The
National President of the group, Alhaji
Aminu Gwadabe, noted that before BDCs were allowed in the official foreign
exchange market, the apex bank over the years tried many methods to ensure
there is convergence of the exchange rates, but it was not successful.
“We have witnessed different auction system, Retail Dutch Auction,
Wholesale Dutch Auction, all these did not deliver the desired result. But in
2006, when all the prescriptions of how to checkmate this problem of spikes in
the forex market, the thought of allowing BDCs come into the official market
was considered.
“By then we had a gap of about N50 ranging to N60, but as soon as
BDCs came into the official market, within one month, the rates converged to a
difference of only 50 kobo between the parallel market and the official market.
So, the BDCs have continued to play that role to the CBN and even to the
government of Nigeria to ensure that there is convergence of rates, elimination
of spikes in the forex rates and that there is exchange rate stability,” he said.
Overtime,
there have been arguments about the role of BDCs. Some even went to the extent
of saying the BDCs are no longer relevant. The single exchange market that came
in 2014, did not even recognise the role of BDCs.
“That regime did not last because they did not consider the role of
the BDCs. But after consistent agitation by the association that there is need
to acknowledge the role of the BDCs and include them, CBN reviewed its stance
and offered us what they call the International Money Transfer Operations
(IMTO) proceeds. Since then, there have been significant achievements.
“We have helped in eliminating the spike, volatility and uncertainty
of exchange rate. Before, people could not plan, manufacturers were crying, but
now they are opting for the exchange rate above the inflation rate due to the
stability been witnessed in the market.
“I think for the past six months, we have seen the dollar stable
between N360 and N365 even at the parallel market. So this is a great
achievement for the manufacturers, for economic planners. At least people can
plan, order their inventory without much stress now.
“That has been one of the important roles BDCs play, in eliminating
the spike, and also the gap between the exchange rates, which created opportunities
for rent seeking. Speculations, which also used to be the other of the day in
the forex market has also been eliminated. Also currency exportation, which is
also an opportunity just because of the opportunities for rent seeking, is also
not the order of the day.
“For an economy to grow, there must be some sectors doing the hard
job. I can assure you that for this convergence that we have seen, the
commendation should go to the BDCs, because it is their hard work that made it
happen. Now, most of the BDCs not even in operations because the parallel
market rate is even lower than theirs,”
he said.
Right
now the BDCs are complaining about operating under what they call challenges of
multiple exchange rates, which they also relate to key issues for continued
transparency and stability of the forex market. The group’s chief said CBN is
having two or three different exchange rates to ensure liquidity, alleging that
such has been posing a challenge for them, as CBN is selling to banks at N358
per dollar and BDCs are buying N360 per dollar from the CBN.
“So it is a very big challenge for our members to operate. It is
something that is making the business very unprofitable and some members are
not able to meet up with their overhead cost and salaries for about six staffs
per operator,” he
said.
Another
complaint that is ongoing is the bank charges. The operators said what the
banks are charging on each BDC transactions is unusually high and they are
calling for a level playing field and competitive rates among the various
operators in the forex market.
“A situation where banks buy dollars from CBN at N358 per dollar and
sell the same dollars to BDCs at N360 does not represents a level playing field
or fair completion, given the fact that we operate in the same market segment.
“But we have hope from all indices and parameters that CBN is also
coming to review their position on the matter. We are all working now on
inflation and once they can achieve single digit inflation, then they will
begin also to ensure that the exchange rate is headed southward to ensure
growth, output and more employment.
“It is very possible to eliminate multiple exchange rates. When you
look at determination of the exchange rate now, we have what we call managed
float. And if you look at even where the exchange rate should go, if not the
inflation rate that is higher than the Monetary Policy Rate, I am sure by now
that the prediction of dollar at N250 would have been feasible. (Guardian)
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