The Manufacturers Association of Nigeria (MAN) has supported last week’s decision by the Central Bank of Nigeria (CBN) to discontinue the weekly sale of foreign currencies to Bureau De Change (BDC) operators.
Yet the Organised Private Sector (OPS) requested the Central Bank of Nigeria (CBN) to go beyond its action on the currency dealers and work towards unifying the foreign exchange (FX) windows in the country in order to checkmate round-tripping and other malpractices.
MAN declared in a statement titled: “MAN’s Perspective on the CBN New Policy on Forex Allocation to BDCs,” signed by its Director General, Mr. Segun Ajayi-Kadir, that the directive of the CBN on the BDCs corroborated with its view and may help address the maladroit (sic) activities of operators in the BDC market.
“However, much of the efficiency and effectiveness of the new guidelines will be determined by how determined the CBN and commercial banks will be to ensure that FX gets to genuine users.
“For instance, with the new policy, manufacturers will depend solely on the interbank market for their FX needs. We hope the banks will provide a seamless process and timely execution of foreign exchange applications by manufacturers,” the association added.
Ajayi-Kadir also noted that MAN had made various submissions on the need for the CBN to collapse various FX windows into a single official foreign window.
“We believe that a single FX window will eliminate the excesses of middlemen, save the value of the naira and allow for available FX to be allocated productively using the official banking protocols,” he added.
MAN further argued that a major challenge with FX allocation to the BDC segment, “is that the operators always lacked the ability and the will to continuously adhere to set guidelines. Most times their operations drift into round tripping and other financial incongruities that negate the overall objective of creating the BDC foreign exchange market.
“The end result was always the escalation of the premium of foreign exchange in BDC compared to the official window and further depreciation of the naira.”
Emefiele, in responding to a question on the matter said the political authorities had engaged the central bank on the infractions going on in that segment of the market in the past.
“This is an issue even the political authorities had engaged the central bank on and we tried our best to defend the BDCs. Put bluntly, even our leaders who constitute the political authorities have raised concerns about the modus operandi of BDCs in Nigeria. We did our best to defend them, but at this stage, we cannot continue.
“So, if you ask me if we carried the political authorities along, I would say the political authorities themselves had long though that this should stop,” he added.
According to the CBN Governor, apart from monetary and price stability, the central bank also has a responsibility to maintain the reserves and exchange rate of the country.
“So, it is our primary role ascribed to us by law that we should do what we need to do. They were countries whose central bank was selling forex to BDCs in the past and at some point they dropped the idea.
“But we have as a result of request and pressure continued to do this and we have done this to see that we create business for those who operate in this market. And we believed that as long as they continue to do this, not only for their benefit, but for the benefit of the economy,” he added.
Also, the OPS expressed optimism that the new policy direction by the CBN might be beneficiary to the economy in the long run, saying no central bank in the world sells FX directly to the BDC except in Nigeria.
They, however, observed that channeling the supply of foreign exchange through the commercial banks without addressing its supply side might unintentionally trigger a boom in the black market for foreign exchange.