Following the cancellation of the sale of about $5.7 billion foreign exchange (forex) annually to about 5,500 licenced Bureau De Change (BDC) operators by the Central Bank of Nigeria (CBN), financial experts are urging the apex bank to ensure that the policy works.
Speaking Wednesday, Mr Laoye Jaiyeola, the CEO of Nigeria Economic Summit Group (NESG) said, “We’ve gone this way before and the consequence of that was a significant devaluation.”
He said whether the CBN gives BDCs dollars or not, it is a matter they should handle because they license them in the first place.
“What the average Nigerian is concerned about is the liquidity of the market and access to foreign exchange as when they require it. Because ordinarily, why would someone go to the BDC to buy at a higher price when the person can get it at the I&E window?”
So if the CBN is saying they are stepping down sales to BDCs and people will have access to forex, that’s fine he said adding that but “when the people do not have access to it, the simple rule of demand and supply will apply,” that means the price of the dollar will go up.
The Managing Director of Financial Derivatives, Mr Bismarck Rewane, said: “The CBN governor has just disrupted one of the juiciest gravy trains in the Nigerian economic racket.
“Even though BDCs are licensed by the CBN, the point had been reached where the programme was no longer tenable and surely not sustainable.
He stated that a country whose total exports and receipts were approximately $59.8bn, was spending $5bn to subsidize supposed Nigerian tourists during a COVID year.
“In other words, spending more on tourism rather than debt servicing. Therefore, the structure of the forex market needed sanitization.
“One of the options is to simultaneously allow banks to retail dollars as they have done in the past and make BDCs engage in retailing the same but at a buy rate different from today’s subsidized rate, i.e buy dollars from the CBN at the parallel market rate less a N10 premium. For example, if the parallel market rate is N500/$, the purchase rate from the CBN will be N490/$. If the BDCs sell at N550/$, the CBN increases its rate for BDCs to N540/$. That will be the same retail rate at the banks.”
He noted that this eliminates the arbitrage corridor and abuse. “It will certainly reduce the demand for dollars and it must coincide with an increase in dollar supply from the CBN. This way, the naira will appreciate towards the ever elusive fair value or the REER (Real Effective Exchange Rate), which today is anywhere between N470 and N490/$.”
– Daily Trust