Why the Central Bank of Nigeria is Cracking Down on Forex Sales

Why the Central Bank of Nigeria is Cracking Down on Forex Sales

The Central Bank of Nigeria (CBN) has banned the sales of foreign exchange (FX/Forex) to Bureau De Change (BDC) operators in Nigeria. The registration of new BDC operators has also been halted with immediate effect.

Godwin Emefiele, CBN’s governor, made the announcement at the end of the monetary policy committee (MPC) meeting in Abuja on Tuesday. The decision has proven controversial, with economists, policy experts and other Nigerian citizens who have been engaging in debates over social media since the ban.

CBN Cracks Down on Forex Sales in Nigeria

BDCs in Nigeria usually receive a weekly supply of FX from the Central Bank (for people who need USD$5000 or less) for onward sale to retail end-users, however, according to Tech Cabal, the MPC noted that the money exchangers had recently become wholesale dealers and had been illegally trading FX to the tune of millions of dollars per transaction.

According to Emefiele, the CBN receives about 5000 fresh applications for BDC registrations per month as new players interested in foreign exchange continue to make huge profits while Nigerians suffer from the continued “dollarisation” of the economy.

The Apex Bank of Nigeria has also accused BDC operators of alleged “rent-seeking behaviour” and involvements in money laundering operations.

“They have turned themselves away from their objectives,” Emefiele said.

“They are now agents that facilitate graft and corruption in the country. We cannot continue with the bad practices that are happening at the BDC market.”

From now on, the CBN will send weekly allocations of US dollar sales to commercial banks to meet legitimate FX demands. The banks will also be monitored to ensure that forex is being provided for the legal use of Nigerians.

“We will deal ruthlessly with Nigerian banks that deal with illegal BDCs and we will report foreign organisations patronising them,” Emefiele said.

The Ban Could Lead to Many Losing Livelihoods

Concerns have begun mounting after the ban that the 3000+ BDC operators in the country will now be thrown into Nigeria’s already-large unemployment pool.

“It’s not a bad decision in itself but it’s bad for the times we are in,” said Kelechi Opara, an economist and Market Insights Officer at MMS Nigeria, quoted by Tech Cabal.

“This isn’t the time to close businesses. We are talking about unemployment and more people are about to be thrown into the same labour market.”

By Luis Monzon
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