This article is a reaction to the Association of Bureau De Change Operators of Nigeria (ABCON) press released in Lagos that was widely reported in the media lately. ABCON said the Central Bank of Nigeria (CBN) must urgently consult with licensed BDC operators to resolve the issues that trailed the regulator’s foreign exchange (forex) suspension
This portrays ABCON said “if the policy was not reversed, it would
worsen the alarming unemployment situation”.
With the benefit of hindsight, the Monetary Policy Committee (MPC) of the apex bank on July 21, 2021, announced the cessation of forex sales to Bureau De Change (BDC) operators.
The Governor of the CBN, Godwin Emefiele, addressing the press said, “in particular, we have noted with disappointment and great concern that our Bureau De Change operators have abandoned the original objective for their establishment, which was to serve retail end users who need $5,000 or less. Instead, they have become wholesale dealers, illegally, in foreign exchange to the tune of millions of dollars per transaction.
He added that “despite the fact that Nigeria is the only country in the world today where a central bank sells dollars directly to the Bureau De Change, operators in the Nigeria Bureaus De Change segment have not reciprocated the bank’s gesture to help maintain price stability in that market.”
Nevertheless, the ABCON request that CBN must urgently consult with the association will be closely examined. To this end, ABCON’s leadership comments will be followed by this writer’s riposte.
ABCON said “it noted that the association was not consulted by CBN before the policy. It however said they are not “exonerating ABCON members from some of the allegations leveled against BDCs, but it is not possible to sanitise a problem with another problem.”
Notably, what is not in doubt is that ABCON members have been
severally warned against sharp practice before the apex bank ended the rapport.
Conversely, the Governor of the CBN in recent time said ABCON members in the “country abuse the privilege and they have remained renegade and so greedy, recalcitrant with abnormally high profit from these sales while ordinary Nigerians have been left to feel the pain and therefore suffer”. Moreso, the apex bank chief added that they have not “reciprocated the gesture to help maintain price stability in the market since the CBN had been selling Forex to them”.
We however need not to remind the CBN that Section 2, Subsection (a) of CBN 2007 Act unequivocally mandates CBN to ensure monetary and price stability as the prime and foremost responsibility.
This is a key liability of the CBN and we do not expect it to abandon
such to the Bureau De Change operators whose genuine commitment cannot be disregard has financial consumerist.
Instructively, the ABCON members are to be blame for their current
predicament. The proclivity for huge profit, illegal activities and
the unpatriotic stance blindfolded their sense of adhering to monetary policy rules, transparency, liquidity, and accountability of forex.
Undeniably, the CBN’s poor monitory strategy failed, woefully, overtime
in checkmating activities of ABCON members and protecting the naira
from unscrupulous acts.
Defensibly, the ABCON leadership and members have the right to meet
with the CBN, the question is, are ABCON leadership and members ready to respect the apex monetary authority?
ABCON said: “As it is now, $1 exchanges for over N500, which cannot be reversed in the short run. So, there is an urgent need for the CBN to go back to the drawing board, consult with the licensed BDC operators and together proffer solutions.”
Significantly, the ABCON’s comments may be right in the sense that the CBN need to go back to the drawing board to fashion solution to the free fall of the naira.
Nonetheless, in my understanding, it not only the ABCON members, the
CBN must urgently consult, if the need be, meeting with all
stakeholders in the financial, manufacturing and service sector is
paramount. And this consultation must also include both orthodox and
heterodox economists, political economists and monetary experts
Consequently, it is true, that $1 exchanges for over N500, which
cannot be reversed in the short run. Our concerns on this are so long
the economy remains unproductive, our love for foreign products and
disdain for local ones pitch higher. The naira and its abysmal
appreciation will continue to plummet, while our foreign reserves ward
Interestingly, the CBN Act demands that we ‘defend’ the Naira using
the foreign exchange rate reserves. In setting out the five principal
mandates of the CBN, Section 2, and Subsection C of the CBN Act
2007 reads “… maintain external reserves to safeguard the
international value of the legal tender currency.”
Put succinctly, we have watched some so-called economic and financial
analysts through televisions, and read others through the newspapers
blaming the CBN for the poor handling of the naira, even though, there
are several other factors beyond the apex bank.
For instance, given the rent seeking behaviour of our economy and its
attendant structural deficit, you don’t expect the CBN to perform
magic, neither do you expect any of its monetary policies to succeed in
a contiguous of sabotages.
Arguably, it has failed to achieve its prime mandate of price
stability, as inflation has remained beyond 10% in place of best
practice 1-3% rates.
Regrettably, CBN is not the only one to do this. Here is our case.
Olamilekan writes via Adefolarin [email protected]