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CBN weakens BDC operations, stops FX funding



The Central Bank of Nigeria (CBN), in a rare courage, yesterday, ended foreign exchange (FX) supply to bureau de change (BDC) operators and registration of new players with immediate effect.

Governor of the CBN, Godwin Emefiele, in a media briefing on the outcome of the Monetary Policy Committee (MPC) meeting, accused BDC operators of rent-seeking behaviour and involvement in money laundering activities, adding that the authority receives about 5,000 fresh applications monthly.

The MPC retained the Monetary Policy Rate at 11.5 per cent and also retained the Cash Reserve Ratio and Liquidity Ratio at 27.5 per cent and 30 per cent respectively.

Speaking on the decision to stop forex sales to the BDCs, Emefiele said the MPC noted with disappointment and great concerns that the BDCs, which is to serve the retail end-users who needed 5,000 dollars or less, had defeated their purpose of existence to provide forex to retail user, but instead, had become wholesale and illegal dealers.

Emefiele said they had become wholesale dealers and illegally transacted FX to the tune of millions of dollars per transaction. The BDCs, he observed, had continued to make huge profits while Nigerians suffered in pain. He said the commercial banks would be monitored to provide forex for the legitimate use of Nigerians.

The CBN weekly supply is the major rationale for the existence of BDC operators, many of whom have been accused of carrying out speculative activities. Hence, yesterday’s action is being interpreted as beginning of the end of the reign of the currency traders, if sustained.

But economists have balked at CBN’s ability to hold its ground against the political class, who are often linked to the ownership of the business. Dr. Bongo Adi, a researcher and economist at Lagos Business School, admitted that the announcement was a demonstration of rare courage.

He said with fears, that pressure ahead in the coming days could force the monetary authority into capitulation.

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