Bureau De Change operators temporarily halted currency sales in Lagos and Abuja on Monday as the Economic and Financial Crimes Commission (EFCC) intensified its raids, forcing foreign currencies to weaken significantly.
The dollar weakened to N1,450 in the afternoon of Monday, February 26, from N1,825 on Tuesday, February 20. Similarly, the euro exchanged at N1,550 on February 26 from N1,855 on February 20. Also, the pound sterling weakened to N2000 from N2,210 on February 20.
Economy Post reported on February 20 that the dollar hit N1,825 in the parallel market, with hunger spreading across Nigeria.
Our correspondent visited the Airport Road BDC centres in Lagos on Monday morning and found operators scampering for safety on the news of the impending raid by the EFCC officials. Operators did not sell or buy currencies in the open for fear of being nabbed by the anti-corruption agency.
At NAHCO on the Airport Road, only few BDC operators were sighted in the afternoon of Monday, as they claimed the EFCC arrested one of their prominent members.
At Zone 4 in Abuja, BDC operators told Economy Post at 12.14pm on February 26 that the raid was affecting both foreign exchange supply and sales.
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“The market is somehow now because of the arrest by the EFCC. People are not selling, and foreign currency rates are falling,” said one of the BDCs, Mr Abdullahi Kure, who noted that “we are being blamed for what we are not responsible for.”
The EFCC commenced raid on BDCs last week to halt naira slide. The anti-corruption agency has arrested several BDC operators for economic sabotage, with the thinking that they are responsible for the continued depreciation of the naira in both parallel and FMDQ (official) markets. The dollar closed at N1,582 at the official market on Monday, February 26.
Temporary relief
Currency experts say the strengthening of the naira due to the EFCC raid is just a temporary relief, urging the Nigerian government to begin to think long-term, rather than devise a knee-jerk response to the naira depreciation.
Presidential candidate of the Labour Party in the 2023 Nigerian general elections, Mr Peter Obi, said BDC operators were always part and parcel of every economy and could be found even in the developed economies of the world.
“To think that the BDCs are the cause of the declining value of the Naira is a smack on rational economic thinking,” Mr Obi tweeted on February 24, ” Obi, a former banker, said.
“The only way to shore up the value of our currency is to move the country from consumption to production, especially export-led production, and fight corruption, which allows unproductive money to pursue the available supply of foreign currency.
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“As long as Nigeria remains an unproductive economy and corruption continues unfettered with people in possession of unproductive excess cash, the value of our currency will continue to depreciate.
“It’s important therefore that government authorities properly understand the workings of a modern economy and channel their efforts accordingly,” he added.
An economist, Mr Ebun Oduluje, said the raid on BDC operators was akin to “using the wrong medicine to treat an ailment,” stressing that the strengthening of the naira against other major currencies at the moment was just a “temporary relief for policy makers.”
“Will the naira continue to strengthen against the dollar and other currencies as a result of the activities of the EFCC? Well, it depends. If the action will be backed by consistent dollar supply, then, fine.
“But I do not see how sustainable that action is in economic terms. The major problem is not the BDCs, but the fact that we are not earning enough dollars. It is not different from the utterance of the former CBN governor, Mr Godwin Emefiele, who blamed Aboki FX (a platform providing currency information) for naira depreciation,” he said.
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BDC reforms
The CBN had, last week, introduced some sweeping reforms to sanitise BDC operations. Under the new guidelines, the CBN introduced two categories of BDC licences, which included Tier 1 and Tier 2.
A Tier 1 BDC has the powers to exercise supervisory oversight over its franchisees. All franchisees must have franchisors’ names, branding, technology platforms and rendition requirements, including a minimum capital requirement of N2 billion.
On the other hand, Tier 2 BDCs will operate only in one state or the Federal Capital Territory (FCT) and may have up to three locations: a head office and two branches. This is, however, subject to the CBN approval and the minimum capital requirement of N500 million.
BDC operators are prohibited from engaging in street-trading, maintaining an account for any member of the public and acceptance of any asset for safe keeping/custody.
They cannot take deposits from or grant loans to members of the public in any currency and in any form and cannot retail foreign currencies to non-individuals, except for business travel allowances (BTA).
They also cannot carry out international outward transfers, engage in off-shore business or maintain foreign correspondent relationship with any foreign establishment.
More so, BDC operators cannot open or maintain any account with any bank or financial institution outside Nigeria.
Sellers of the equivalent of $10,000 and above to a BDC operator must declare the source of the foreign exchange and comply with all AML/CFT/CPF regulations and foreign exchange laws and regulations, the guidelines say.
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Payments to customers for cash purchases of foreign currency of the equivalent of above $500 must be by transfer to the customer’s naira bank account. If the customer is non-resident (whether Nigerian or not), a BDC operator must issue the customer a prepaid NGN card.
Also, payments to customers for cash purchases of foreign currency of the equivalent of $500 and below may be made in cash.