The Manufacturers Association of Nigeria (MAN) has sided with the Central Bank of Nigeria’s (CBN) decision to stop selling forex to Bureau De Change (BDC) operators. The association is also pushing for the unification of FX into a single window.
This was disclosed in a statement titled: “MAN’s Perspective on the CBN’s New Policy on Forex Allocation to BDCs,” signed by its Director-General, Mr Segun Ajayi-Kadir.
The statement read in part:
“Much of the efficiency and effectiveness of the new guidelines will be determined by how determined the CBN and commercial banks will be to ensure that FX gets to genuine users. For instance, with the new policy, manufacturers will depend solely on the interbank market for their FX needs. We hope the banks will provide a seamless process and timely execution of foreign exchange applications by manufacturers.”
Ajayi-Kadir further mentioned that MAN has submitted many comments urging the CBN to merge the multiple foreign exchange windows into a single official foreign window.
“We believe that a single FX window will eliminate the excesses of middlemen, save the value of the naira and allow for available FX to be allocated productively using the official banking protocols,” he added.
MAN went on to say that one of the biggest issues with FX allocation to the BDC segment is that the operators have always lacked the capacity and the motivation to follow specified rules. Most of the time, their operations devolve into round tripping and other financial inconsistencies, which defeat the purpose of establishing the BDC foreign currency market.
“The end result was always the escalation of the premium of foreign exchange in BDC compared to the official window and further depreciation of the naira.” MAN stated.
What this means
Although the CBN has been commended for its actions, the new rules’ efficiency and efficacy will be decided in part by how dedicated the CBN and commercial banks are to guarantee that FX reaches real consumers.
Furthermore, MAN believes that a single FX window will remove middlemen’s excesses, preserve the naira’s value, and allow available FX to be distributed effectively via official banking processes.