As Nigerians gather joyfully to kill the Naira

I state once again as I have in many forums, that Nigeria cannot continue with the idea of having 10,000 Bureaux de Change. Nigerians are famously selfish (and some will say short-sighted) and we are having less and less sense of collective development or nationalism.

It is not every money that can be grabbed that we should grab.  We had 74 BDCs as at 2005. It became 2,700 in 2016 and 5,689 by 2021. It looks like the CBN stopped issuing new BDC licenses altogether in 2021 because the 5,000 mark had been crossed since 2019 according to my independent research.

The frustration of getting 500 new requests every week made CBN Governor Emefiele to take the decision of selling foreign exchange to so many thousands of players. Many people owned three or four or five licenses. Most members of the National Assembly and State Assemblies owned BDCs. Emirs, Obas and Obis/Ezes were not to be left behind. Top bankers owned theirs. In fact, anybody who was anybody. Governors and Ministers owned through proxies. And this led to the dollarisation of the economy.

Any keen observer would have noticed that almost all our politicians never spend the naira. Most move around with bales of US Dollar in their car booths, and this did not start today; only that it is now the standard. Even VP Osinbajo’s son, while felicitating with Yusuf Buhari, donated $100 on behalf of SouthWest youths. His dad should have let him know the implication of that but for the fact that it is way too rampant in government circles. 

By spending US Dollar in government circles, the people in Buhari’s government have cast a vote-of-no-confidence on the naira and cannot, therefore, expect ordinary Nigerians to show more patriotism than they are showing.

But back to the BDC issue. It is ridiculous to hear people say the stoppage of dollar sales to BDCs will affect manufacturers. BDCs are meant strictly to service the invisible trade segment of the market (travel, school fees and such like). The manufacturers indict themselves and reveal that the BDCs have been doing illegal business by their statement. Needless to say, the number of BDCs are way too many that no regulator could even sieve through their weekly returns, so the CBN gave up on checking a long time ago. The banks can service invisible trade better and be monitored. The Managing Directors of the banks also understand that they have a lot more to lose if any of their staff is found to be bending the rules for tiny amounts in dollars. Therefore, with the banks handling that segment, the CBN can see something close to the real demands for the dollar for invisible trade transactions. Before this development, the CBN was merely packing hard-earned dollars and throwing into the Atlantic Ocean, where it ends up in the pockets of smart Alecs. We should never again return to such a wasteful and obnoxious policy under any form of blackmail. By way of data, the last time I checked, there were 145 moneychangers or BDCs in the whole of the UK. In New York, which is another tourist haven, they had 40, all with offices. In the UAE another tourist melting pot, they had 130. Nigeria set another ridiculous world record with 5,000, 6,000 or 10,000 BDCs. BDCs should thrive where tourists throng.  We are all killing this currency and by extension, this nation. And we will all suffer when the doodoo hits the fan.

The slack from CBN

Ordinarily, one should be able to say all eligible transactions are being met by the Central Bank of Nigeria, and that the apex bank has no business with the black market… but not so fast. I need to however clarify that we should not conflate BDCs with black market, which had been run for eons by the abokis/mallams from northern Nigeria, who had always been satisfied to make a spread of N2 or N3. That is the best we can get and should be working towards, for reasons I will explain. Anyone with a BDC license should stick to the letter of that license. A BDC should obtain money from travellers and sell to travellers, full stop. For now, we don’t have many travellers in and out of Nigeria, and so holders of the license should know that business will be very slow. 

The black market could be tackled but the CBN cannot be seen to pay much mind to it. It is called black for a reason, for the fact that only transactions that cannot fit into genuine purposes will berth there. But there are a number of issues here. Firstly, no organisation can meet up with the kind of drive-through service we get from the ‘Mallams’ or ‘Abokis’, who form very good relationships with their customers. Bank tellers are very unfriendly these days and I have seen how they show so much near contempt for travelling customer seeking some dollar. The process of ensuring that forgeries don’t slip through the banking process makes it an unfriendly experience for genuine customers who need dollars too. And one must admit that there are thousands, maybe millions of Nigerians whose core business is to wake up daily, forge documents and look for whom to defraud.

So, what the CBN should do, ideally, is to ignore the black market and squarely service the official markets. If the bank can cut out fraudulent requests, meet demands in the import and invisibles markets, and apply some suasion with key members of the BDC segment who are hurt and are ready to bring down the system, that black market should crash to a reasonable level. The CBN could ask the key BDC players to reorganise themselves, merge and prune numbers to not more than 100, put in some corporate governance, establish IT systems and be ready to be supervised like the banks. The UAE model is a good one to follow. BDC business could be expanded to local transfers and they could be permitted to tap into the remittance markets if that will work.  Fringe players will continue to exist but will not be able to move the market negatively.

There are however some thorny areas. Corruption drives dollar demand in Nigeria and a lot of the dollars being spent by the same government people who are saddled with policymaking, come from the black market. Nobody receives a bribe in naira because it is too bulky. Can anything be done to slow this down? We also understand that the CBN rations the bi-weekly bids from importers, and that most importers only get say 30 per cent of their bids. This is a major red flag, if true. It is the key confirmation that Nigeria is not ready to fulfill the demands of her people for FX. If the CBN believes that demands are spurious it should move against such importers but one thing that will help the naira immediately is for the CBN to be able to fulfil 100 per cent of the import demands especially for manufacturers who need inputs. That leaves us with the 43 items for which CBN is not selling dollars. I support that policy. We are talking of toothpicks, eggs, Indian incense, meat, vegetables and such like. 

Let me then leave us with the words of no less than Lee Kuan Yew, which needs no further elucidation: “A nation is great not by size alone. It is the will, the cohesion, the stamina, the discipline of its people and the quality of its leaders which ensure it an honourable place in history”