Before round tripping kills the economy

The Central Bank of Nigeria (CBN) is reportedly contemplating selling forex directly to Bureaux de Change (BDCs) operating in the country following mounting concern over the apparent failure of the deposit money banks to sell same to BDCs in line with its directives. CBN had launched a new forex policy earlier this year which abolished […]

The Central Bank of Nigeria (CBN) is reportedly contemplating selling forex directly to Bureaux de Change (BDCs) operating in the country following mounting concern over the apparent failure of the deposit money banks to sell same to BDCs in line with its directives. CBN had launched a new forex policy earlier this year which abolished the dispensation of two forex windows in which one US dollar sold for between N197 to N199 on the official window. It sold for nearly 300 naira on the parallel market.
Under the new policy, CBN would sell forex to deposit money banks that are expected to supply same to BDCs. However the banks are failing to do so, leading to the unprecedented spike in the dollar’s price in the parallel market. As at last count the dollar and the British pound were selling for N465 and N540 respectively. CBN’s displeasure was expressed at the last meeting of the Monetary Policy Committee (MPC), where its governor Godwin Emefiele frowned at the attitude of banks for defying the apex bank’s directive in this matter. President of the Association of Bureau de Change Operators Aminu Gwadabe corroborated Emefiele’s stance and said some banks withhold money belonging to his members for weeks without supplying them with forex. He said the fund so manipulated finds its way into the market for speculation.
However as trends in the market indicate, the scope of violations goes beyond the infractions of the commercial banks alone but may also be enjoying the active connivance of some officials of the CBN itself. Indeed the syndrome of free for all comers’ bazaar and the attendant crisis in the forex market betrays an insidious role of officials of the apex bank who have allowed the syndrome to persist for so long through acts of commission and connivance with their agents. A case in point was the concession granted to pilgrims to purchase forex at the rate of N197 per dollar up to a maximum of $750 per pilgrim. There are indications that many unscrupulous non pilgrims, who operated with the connivance of officials in both CBN and deposit money banks, obtained forex at the concessionary rate and even beyond the stipulated upper limit of $750. The forex so obtained from fraudulent processes found its way into the market where its price is speculated upon leading to the out of control exchange rate. At the end of the day, it is the shrinking productive sector of the Nigerian economy that is bearing the brunt, leading to more collapses of genuine businesses while speculators, round trippers and their sponsors smile their way to the banks.
Incidentally, CBN has responded to the challenge with relatively ineffective advisories to speculators to desist from the practice and has thereby abdicated its due responsibility to cage the perpetrator banks and their agents for flouting its directive. It does not serve the purpose of CBN nor that of the country for the institution to convey the impression that all it can do is to bark but not bite in the present situation. Rather, the occasion demands a proactive response by utilising its statutory regulatory powers to sanitise the forex market.
Unlike ever before, banking has attained a level of sophistication that avails it the technical capability for tracking any transaction, to any part of the world. It is therefore unacceptable that CBN cannot track and sanction deposit money banks and their cohorts for running riot with its directive and going scot free.  Granted the aspirations of successive governments to reduce the country’s dependence on imports and reverse the foreign orientation of the economy, the Nigerian economy is still forex driven and acute scarcity of the foreign money always twists the country into a bind. That is why the present crisis needs to be frontally addressed by CBN, to allow the economy breathe and revive. In the face of the ongoing recession, a meltdown of the forex market is one dilemma Nigerians can do without, at least for now.