The Central Bank of Nigeria has hit at the Bureau De Change (BDC) for illegal forex trading and will henceforth discontinue the sale of forex to the Bureau operators in Nigeria.
The governor of the CBN, Godwin Emefiele made this known while addressing the press during the MPC briefing on Tuesday, 27th July 2021.
The Central Bank also confirmed that they will no longer license new BDC operations in the country and have also halted all current processes for new licenses.
The Governor, while making these announcements, promised to deal “ruthlessly” with Nigerian banks caught in these illegal acts.
According to the Governor, “in particular, we have noted with disappointment and great concern that our Bureau De Change operators have abandoned the origin objective for their establishment, which was to serve retail end users who need $5,000 or less. Instead, they have become wholesale dealers, illegally in foreign exchange to the tune of millions of dollars per transaction.”
“Despite the fact, that Nigeria is the only country in the world today where a central bank sells dollars directly to the Bureau De Change operators in the Nigeria Bureaus De Change segment have not reciprocated the bank’s gesture to help maintain price stability in that market,” he continued.
The governor noted that this act by the BDC is in contrast to the understanding with the apex bank, which highlights that the BDCs are allowed to make a small margin from the sales of the US dollar allocated to them by the CBN. However, he opined that they have become somewhat, greedy, by taking abnormal profit, which has further affected the exchange rate of the country.
Hence, the central bank noted the following unfortunate outcomes:
- Avalanche of rent-seeking operators who are only interested in widen margins and profits from the foreign exchange market regardless of prevailing rates in the market.
- The gradual dollarisation of the Nigerian economy, with tandem adverse consequences on the conduct of monetary policies and subtle conversion of the cashless policy initiative of the Central Bank of Nigeria.
- Prevailing ownership of several BDC by the promoters in order to illegally procure foreign exchange multiple times from the Central bank.
- Numerous and repeated financing of unauthorised transactions with foreign exchange procured from the CBN.
- Several international organisations, embassies, and institutions operating in Nigeria patronise BDC through illegal forex dealers to fund their local operations.
According to the CBN, these actions have placed a significant financial burden on the apex bank, and hence necessitate the halt of forex sales to the BDCs and suspension of new license issuances.
It is worth noting that this is not the first time the CBN has placed a ban on the sale of forex to BDCs. In 2016, the Central Bank of Nigeria called a press conference announcing the discontinuation of the sale of forex to Bureaux De Change (BDC) operators.
The decision was made in order to curb the dubious acts of the BDC operators who instead of catering for retail users in need of about $5,000 are involved in transactions to the tune of millions of dollars, indicating that they may be sourcing these dollars from unscrupulous means.