Bureau de Change (BDC) operators in Lagos, Abuja and Kano have been experiencing mixed fortunes owing to the recent forex unification policy of the Central Bank of Nigeria (CBN), Daily Trust reports.
The CBN had on June 14 announced the unification of all segments of the foreign exchange (FX) market, and the Naira. Checks by Daily Trust showed that on Friday, the dollar closed at N803.90 on the Investors and Exporters (I&E) window.
At the parallel market, it was exchanged for between N825 and N830 in Lagos on Saturday. In Abuja, it was sold between N810 and N812 while in Kano, it was exchanged for N820 at the weekend.
Daily Trust recalls that a day before the announcement, the official rate was N463 per USD and N750 at the parallel market which inferred about a 62% premium to the official rate.
Nigerians in need of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) usually accessed forex from the CBN at the official rate through their commercial banks, which allows travellers access to cheaper foreign currencies for travel.
While the BDC operators in Lagos, Nigeria’s commercial centre have acknowledged a boom in their operations, their counterparts in the Federal Capital City of Abuja and those in Kano, the northern Nigeria commercial nerve centre, have continued to lament the negative impact the policy has brought on their businesses with many of them now jobless while a host of others fear they may soon go out of the business.
“Because the banks have no dollar with them, the demand is going high. People are coming every day. The banks are also in need of the dollar presently. Many of them are coming here to buy and settle their customers,” a major BDC operator in the popular Wapa BDC Market in Kano, Alhaji Yusuf Labahani Abdullahi, said.
This development, many BDC operators admitted, has knocked out round-tripping which had hitherto been the strength of the supply into the black market and a major boost for their business.
“Before now, people that get the dollar at the official rate bring it here and sell to us and we also sell afterwards to make a gain, but now, since everything is almost the same, they are no longer supplying and people even prefer to go to the bank to do their transactions,” Aliyu Bello, a BDC operator in Abuja, told one of our correspondents.
The sorry situation in Kano
In Kano, since the new policy by the CBN, operators in the popular Wapa BDC market have been battling with the scarcity of the forex as fewer people now come to the market to sell or buy.
When one of our reporters went around the market in Fagge LGA on Thursday, it was found with only a few people sitting in clusters discussing while others were sighted calling out to passers-by to enquire if they wanted to transact business there.
Nura Usman, an operator in the market, said since the new policy, they have not had access to forex from commercial banks.
He lamented that the situation has rendered many of them jobless with nothing to feed their families.
“In this market, we have many people including the poor who get what to eat only when the dollar is available,” he said.
“Many of them and other medium business owners are suffering while the rich ones are living off their capital. It has affected everything,” he added.
Usman said the only way out of the problem is for the government to reverse the policy and return issuing dollars directly from the CBN to the BDC operators.
Another forex trader in the market, Yusuf Labahani Abdullahi, said only business owners now have dollars with them which is why the price is going high by the day.
He said because people noticed the high demand in the market, they now decided to keep and hoard it until the price spikes. That, he said, “Will further make the price rise.”
Similarly, the chairman of the BDC market, Sani Salisu Dada, said the market largely relied on marketers and travellers trading in USD and other forex, and that since declaring that the dollar is open to price itself, his people have no access to it.
Same scenario in Abuja
Like their counterparts in Kano, BDC operators in Abuja are also expressing displeasure over the low patronage the forex unification policy has subjected them to.
A visit to the popular Sheraton Street at Wuse Zone 4 by Daily Trust confirmed that the BDCs have been hit by low patronage.
Speaking to Daily Trust, an operator in the capital city, Ahmed Sabitu, said USD currently fluctuates between N800 and N860 at the black market.
“Because the difference is very small, sometimes N20, people will prefer to go to the bank. Sometimes in a whole day, only one customer will come, unlike before when we had over 20 people coming to do transactions in a day,” he said.
Another operator, Shafiu Musa, said they believe the new forex policy by the CBN was only targeted at ruining the business of BDC operators and that it will not have any economic impact.
Also speaking, another BDC operator, Aliyu Bello, told Daily Trust that market forces were now the sole determinants of the sale of USD. He added that people have lost appetite for coming to BDC operators, which may lead to many of them (BDCs) abandoning the business.
Boom in Lagos
In the Lagos axis, findings by our correspondent indicated that the BDC operations were booming over the scarcity of the USD.
It sold between N825 and N830 in parts of Lagos on Saturday, especially at Murtala Muhammed International Airport (MMIA) when our correspondent checked.
By implication, the unification of the exchange rate has not eased the demand for dollars as it continued to increase because of high demand.
A BDC Operator at the MMIA, Ubada Usman, in a chat with our correspondent, said the high demand for the dollar has been pushing up the price despite the unification.
“I am telling you if the CBN pumps dollars into commercial banks today, the price will go down but in a situation where the banks don’t have the dollars to give, the BDCs remain the alternative,” he said. Another operator who simply identified himself as Hassan and operates within the premises of MMIA said, “Since the CBN introduced this new policy of dollar unification and other initiatives, the foreign currency has been very scarce. You can’t get it anywhere. People are looking for dollars up and down and they cannot get. This is why it is going up.
Also, our correspondent observed a beehive of activities at Allen Avenue in Ikeja, a major BDC hub in Lagos. One of the operators, Nasiru Abdullahi, said nothing has changed and that the cost of getting dollars remained on the increase despite the CBN policy.
Benefits of policy not immediate – Experts
Experts warned that these benefits are not immediate and the country would have to withstand the initial pressures and boost local production to enjoy the benefits of the policy.
A former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, who said one month is too short to begin to expect results from the reform, stressed that the noticed deprecation is as a result of the pressure on the market owing to the backlog as foreign airlines and investors were unable to repatriate their funds for many years.
“One month is too short to begin to expect too much from the reform that has taken place in the foreign exchange market. So far we have a market that is more transparent which has made buying and selling easy.
“The supply situation from autonomous sources is improving gradually unlike what we had under the previous policy regime when almost 100% of the supply was by the central bank.
“So far close to 90% of the supply is coming from autonomous sources which is a good thing but now there is a lot of pressure on the market which is creating some volatility issues which is also reflecting on the depreciation of the currency,” he said.
Dr Muda, the Managing Director of the Centre for the Promotion of Private Enterprise (CPPE) said the pressures are short-term manifestations before the market stabilises. He, however, noted that he expects the CBN to intervene to keep the exchange rate within a sustainable band.
The National President of the Nigerian Association Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dele Kelvin Oye Esq, noted that the unification policy of the CBN is a step in the right direction, adding that there is still a lot to be done to fully realize its potential in boosting economic growth and development.
He called on the government to take decisive actions to address the underlying structural issues affecting the economy to ensure sustainable growth.
“The policy has had a positive impact on our sector as it has helped to reduce the volatility of the naira and provided a more stable environment for businesses to operate. This has, in turn, boosted investor confidence and attracted foreign investments into the country.
“However, to further boost the gains of the policy, there is a need for the government to address the structural issues affecting the economy. This includes improving the ease of doing business, fixing the power sector, and investing in critical infrastructure.
“These actions will not only attract more investments but also create an enabling environment for businesses to thrive,” he said.
Senior Economist at SPM Professionals, Paul Alaje, who said the right economic term for the policy is devaluation, said in the short term the government will gain more by earning more revenue while households and businesses would pay more.
“Devaluation in its sense, may not be good and it may not be bad. It depends on the country. So when Nigeria devalued the Naira, there were expectations that One, foreign reserve would increase, and Two, investors will come into the country.
“The question is, in the last month, there have been no major foreign inflows to Nigeria. The last report that was shared by the Bureau of Statistics showed that investment reduced even though that report doesn’t cover the last month, but what is clear is that Nigeria has “visualised the FX market hoping that investors will come.” Yet, we believe that investors will come, but it might not be as quickly as expected by many Nigerians.
“So in the coming period, if and when eventually investors come, the question will be: will Nigeria be able to convert some of the investments to solve some of our economic challenges,” he said.
Alaje argued that things are expected to be tougher as inflation will go higher because most of the things Nigerians consume are imported. He, however, noted that things should get better in the medium term as local production is encouraged and infrastructure is improved. In an earlier interview, the President of the Institute of Chartered Accountants of Nigeria (ICAN), Dr. Innocent Okwuosa, who applauded the unification policy, said the government should provide palliatives, especially to poor income earners.
“The issue of foreign exchange cannot be viewed in isolation. But we will say that the government is in the right direction on that because the gap between the official and unofficial rates is a distortion within the economy that every responsible government must work to close.
“To that extent, we support the policy of the government in that direction. But there is a need for palliatives that will make the poor income earners not suffer from such effects,” he said.
The President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe in an interview with an online platform, stated that despite the new exchange rate policy by the CBN, the foreign exchange market remains volatile because BDCs are excluded from the I&E window.
“The volatility of the naira continues to underpin the slow economic growth of Nigeria. The I&E window is laudable, it’s patriotic and nationalistic, but there is no policy that can actualize its mission without carrying the interest of the subsector (which is the BDCs).
“The I&E window is supposed to run on three legs, the banks, the CBN and the BDCs, overtly or covertly, the BDCs are missing,” he said. Meanwhile, the Director, Corporate Communications of the CBN, Dr Isa Abdulmumin, said the apex bank awaits the opinions of experts and Nigerians on the impact of the policy. He said such contributions would be useful to the bank.
From Abiodun Alade, Abdullateef Aliyu (Lagos), Clement A. Oloyede, Zahraddeen Y. Shuaibu (Kano) & Philip S. Clement (Abuja)
