CBN and money changers

Godwin Emefiele is facing his first litmus test with the National Assembly. The reform of the nation’s Bureau de Change (BDC) business by the new governor of the Central Bank of Nigeria (CBN) has drawn the ire of the legislature.
The lawmakers have a penchant for meddling in the affairs of the CBN.  Sometime in 2005 the CBN under Charles Chukwuma Soludo discovered that the aggregate capital base of the 90 banks in the country was less than that of one bank in Singapore. Soludo initiated a Banking Consolidation exercise and directed banks to shore up their capital base from N2 billion to N25 billion.
The lawmakers responded with a parallel policy. They ordered the CBN to adopt the policy of banking categorization.  Under it, the nature of a bank’s business would determine its capital base. It took the effrontery of then President Olusegun Obasanjoto consolidates the position of the apex bank and counter the threat from the legislature.
Now the apex bank has announced wide ranging reforms designed to check the duplication of BDC ownership which empowers some money bags to source more forex from the CBN and sell to corrupt politicians and civil servants who in turn smuggle it to Dubai and other money laundering havens.
BDC operators contend that the new policy would deplete thousands of jobs, widen the margin between the official and parallel marketrates and herald the return of black market money changers. These are colossal lies.  Kenya dropped the feeding-bottle policy and its currency is now stronger than the naira.  The exchange rate is 80 shillings to the dollar.  Nigeria is alone in the strange business of funding poorly regulated BDCs.
The war of words between BDC operators and the CBN is absolutely unnecessary. Those who are close to the industry know what the BDCs do with the forex they source from the nation’s lean reserves.
Like in Palestine of Jesus’ day, money changing is lucrative business in Nigeria.  That explains why the landscape is dotted with 3, 208 registered BDCs. The CBN is processing 1, 417 fresh applications. If the new applications sail through, Nigeria would be selling dollars to 4, 625 BDCs.  At an average of $50, 000 per BDC per week, the CBN would need more than $12 billion annually to fund BDCs. Ironically the numerical strength of the BDCs does not aggregate into healthy competition that could stabilise the naira.
Most of the BDCs are owned by the same people operating in different names to get more dollars weekly from the CBN. In the first quarter of 2014, the apex bank allocated a staggering sum of $1.7 billion to BDCs alone. In 2013, the BDCs gulped down $5.31 billion from the nation’s reserves. The CBN had since 2006 developed a rather unhealthy policy of spoon-feeding BDCs. It allocates a good chunk of the nation’s forex to them and does not bother to find out how the money is spent. The apex bank lacks the manpower to pore over the books of 3, 208 BDCs.
Those who want the BDCs to continue business as usual should consider the fact that terrorists have taken over a huge swathe of north-eastern Nigeria and no one knows how they fund their deadly operations. Besides money laundering, a chunk of the $5.3 billion sold to unsupervised BDCs in 2013 might have inadvertently slipped into the hands of the terrorists.
The Cashlite policy of the apex bank has rendered the BDCs practically useless to Nigerian travellers. The use of Master Cards issued by Nigerian banks is the trend now. It reduces the risk of losing cash to thieves.
The conversion of huge wads of naira into dollars or euros for use at the traveller’s destination is no longer in vogue. In fact, one does not need to travel with cash to Europe or America. The trolleys at JFK International Airport in New York, for instance, are locked electronically. The system frees one for use as soon as the traveller slots in an internationally accepted credit or debit card and it deducts the stipulated sum of $5.
At the retail outlets strewn across America, shopping is done with debit or credit cards. Few want to trade goods or services for raw cash.
The Master Cards issued by Nigerian banks are accepted for payments practically everywhere in the world. With Master Card, few travellers need the services of BDCs.  Besides payments at shopping malls, Master Cards from Nigerian banks are used to withdraw money from ATM terminals in most parts of the world. The traveller simply pays naira into his account and informs the bank of his plan to travel. At his destination he slots the card into an ATM and it churns out dollars or euro.
The line of least resistance is to let the BDCs source their forex and sell them to whoever wishes to patronize them. They could be encouraged to promote tourism and generate forex for the country.
The CBN should drop the N35 million capital base for BDCs and allow them to do business the way they want. The ground rule should be: source your forex and sell it the way you want.