Banks sell forex far above interbank rate – ABCON Presiden


To the President of Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe, the factors responsible for the dwindling fortunes of the naira are more than the fallen price of crude oil at the international market and some infractions on the part of some BDC operators. In this interview with NGOZI AMUCHE,he outlines the hurdles confronting operators in the industry and proffer solutions to the challenges. Excerpts:

Uba Group

Recently, officials of the Department of State Services raided and arrested some of your members, who were allegedly selling foreign currencies above stipulated exchange rate of N385 per dollar. Can you react to this?
Well, the DSS called us and told us to warn our members, that selling above the Central Bank of Nigeria’s stipulated exchange rate is not allowed. We did as they expected us to, this is because we are law abiding citizens, and we respect the decision of the CBN, which is the apex regulator of the banking industry and foreign exchange market.

It appears that BDCs operators are usually blamed for volatility in the financial system. Does that mean you don’t have a grip of the group?
If I don’t have a grip on members of ABCON, I won’t be here. While we are not totally surprised by the decision, we however believe that there are better ways of addressing the challenges in the foreign exchange market. It is so unfortunate that the BDCs are always blamed whenever there is naira volatility in the system. Before the CBN started selling dollars to BDCs in 2006, there were about 270 BDCs in the country. Despite the harsh operating environment, these operators were able to survive, servicing their clients.

Your members seem to be guilty of certain infractions of regulatory rules, what are you doing to curtail this?
You see, the ABCON has zero tolerance for non-compliance with regulatory requirements and unethical conduct amongst our members. It is for this purpose that the Association created the office of Compliance Officers in its National Secretariat and in all its zonal offices and also provided official vehicles for the compliance officers to regularly pay inspection visits to BDCs under our jurisdictions.

What are the likely impacts of the devaluation of naira on the economy?
Naira devaluation is not the solution to Nigeria’s problems. I think government should pay more attention to economy diversification. The strengthening of the BDCs will also be in line with the government’s diversification agenda, because the benefit that a strong BDC industry will bring to the economy is enormous.

The BDCs Do noT DepenD on exChange raTes To make profiT anD Therefore will BenefiT noThing from a DepreCiaTeD naira. DepreCiaTion affeCTs operaTors’ working CapiTal as They are more inTeresTeD in Turnover Than The exChange raTe

The BDCs are also working on achieving transaction automation for members, create live trading platforms and uniform rate for operators. The naira has depreciated to an unbearable minimum, how does this affect your operations, considering that you are in business to make profits?
The BDCs do not depend on exchange rates to make profit and therefore will benefit nothing from a depreciated naira. Depreciation affects operators’ working capital as they are more interested in turnover than the exchange rate. The BDCs do not also determine the exchange rate and ABCON has continually worked closely with the CBN to ensure that dollar supply increases so as to restore calm in the foreign exchange market.

What are your plans to forestall exploitation of foreign exchange end users?
As a way of enhancing transparency in the BDC sub-sector, we have decided to introduce weekly foreign exchange rate band. This will serve as a guide to all BDCs and members of the public on the prevailing exchange rate across the country.
The rate band will be operated in line with the regulated foreign exchange rate in the economy. This is to forestall exploitation of foreign exchange end users and also ensure that end users are informed enough to avoid falling victims of exploitation.

Sometimes ago, you called on the CBN to outsource the dollar distribution role to independent distributors, since the banks have failed in their assigned role. What is the latest development?
The banks that are so far involved in dollar sales to BDCs include First Bank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa and Unity Bank. Others are Diamond Bank, Zenith Bank and Stanbic IBTC Bank. The BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu are yet to get a single dollar from these banks. The banks are also selling dollar far above the interbank rate.
What we are saying is that instead of staggering the payment, the banks should sell to the BDCs on same day, so that the impact will be felt in the market. Our members across the country have funded their accounts but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks.

What do you mean when you said the BDCs are the engine block of the economy?
Yes, Nigeria’s economy can be strengthened to meet the forex demand at the retail end of the market, so that they can continue to enhance employment generation in the country. Despite the challenges facing the economy, the CBN and BDCs can work together and find sustainable solutions that can help the country wriggle out of the ongoing forex crisis and achieve full economic recovery. For instance, globally, bureaux de change operators are critical agent of economic growth for countries. With over N250 billion worth of investments in the economy, the BDCs have not only enhanced employment generation, but remained one of the major employers of labour and have contributed to the CBN’s revenues streams through one per cent commission charged on dollar sale to operators.