When the Central Bank of Nigeria revoked the licences of all class ‘A‘ Bureau de Change operators, not a few stakeholders in the foreign exchange market, felt that, though, the action was necessary to check money laundering, it would put some pressure on the dollar, especially at the end of the year.
While announcing its decision, the apex bank had said that the target foreign exchange end-users had been sidelined, while large transactions that should have been channelled through the banking system had been carried out by the Class ‘A‘ BDCs.
It, therefore, said the withdrawal was part of measures to stem the gross abuses of the enhanced Class ‘A‘ BDCs in line with its avowed commitment to eradicating money laundering.
While BDC operators in the Class ‘B‘ category applauded the CBN‘s policy, saying the abolition of class ‘A‘ BDCs would eliminate monopoly in the system and create a level playing field in the foreign exchange market, affected Class ‘A‘ BDC operators said the withdrawal of their licences would lead to a decrease in the supply and availability of foreign exchange.
According to them, the market may also be destabilised as a result of uncertainty as regards future availability of foreign exchange.
The class ‘A‘ BDCs said in a statement that competition among their members had done a lot in stabilising exchange rate in the Nigerian economy.
The statement said, ”We all know that more competition is better than less competition. we believe that the regulatory authorities should, in their functions, guide, support and help the players in the market to do the business according to laid down operational guidelines.
”Stopping their activities entirely has very serious negative consequences on the economy. Policy somersault, we all know, discourages foreign investors. the reasons offered by the CBN, no matter how genuine they may sound, are not good enough for the wholesale revocation of class A operators‘ licences.”
The Chief Executive Officer, Promisory Investments Limited, Mr. Adekunle Salami, said, ”Even though the general public may not readily see the underlying implications of CBN‘s action, the impact will soon be felt by all as the effects begin to manifest.”
He said the action would lead to a steadily increasing and fluctuating rate of the dollar, wider gap between the official and ‘black market‘ exchange rates, untamed inflation rate, increasing incidence of business failure and unmitigated hardship for families, whose investments had already been eroded.
”The action will add to the pressure on the employment market as many people will be relieved of their jobs. Foreign investors may also be wary of investing in the country. they may perceive the unreliability of our systems in the form of policy somersault and poor approach to our public policy administration,” Salami said.
Another operator, who craved anonymity, because he was not authorised to speak on the issue, argued that regardless of the reasons offered by the CBN for the general revocation of the class ‘A‘ BDC operators‘ licences, the action was ill-timed and lacked due process.
He said some of the operators had never carried out any transaction, noting that some just got their licences a day before the clampdown.
”The action will lead to a decrease in the supply and availability of foreign exchange and there will also be negative perception in the market about future availability of foreign exchange. the competition among the class ‘A‘ BDC has achieved a whole lot in stabilising the exchange rate,” he said.
The Association of Bureaux de Change Operators of Nigeria, however, said that the abolition of class ‘A‘ BDCs by the CBN was a wake-up call for operators in the BDC industry.
In a statement by the association, the President, ABCON, Dr. Emmanuel Balogun, said that the decision was a strong signal to all BDCs that the apex bank would not condone abuses or non-compliance with regulatory requirements.
He added that the directive was particularly instructive to BDCs, who wanted to continue in business, especially accessing foreign exchange through the CBN.
Balogun said the observations of the CBN, which led to the decision confirmed the position of the association that “categorising BDCs did not add any value to the industry, but would rather give room for abuses and create a class of middlemen and the emergence of monopolistic practices in the industry, which would impede access to foreign exchange in the economy.”
He noted that the abolition of class ‘A‘ BDCs would eliminate the monopolist power enjoyed by these BDCs and would create a level playing field in the BDC sub-sector.
He said, ”This will in turn facilitate the objective of a stable exchange rate, as all BDCs will now have to compete by offering attractive exchange rates to end users. the class ‘A‘ BDCs had used the huge volume of foreign exchange they purchased from the CBN to compete against traditional BDCs and dominate the market, especially in terms of exchange rate offered to end users.
”ABCON, being the umbrella body of the industry, however, welcomes erstwhile class ‘A‘ BDCs converting to class ‘B‘. the membership of the association has always been open to all BDCs even during the era of categorisation. Immediately they comply with the licence requirements of the CBN and membership requirements of ABCON, all the privileges and rights of membership will be extended to them while they will be expected to fulfill all membership obligations.”
The apex bank had, in a statement, signed by its Head, Corporate Affairs, Mr. Muhammed Abdullahi, said the latest appraisal of the policy initiative revealed gross abuses of the enhanced official funding of the Class A category of the BDCs and the negation of the expected benefits to the economy.
The statement said, ”The CBN has also been inundated with complaints from foreign countries that some Nigerian travellers indulge in cross-border transportation of large sums of foreign currencies in cash. Indeed, returns from the Nigerian Customs Services on foreign currency declaration by travellers show that large amounts, up to $3m cash, have been taken out of the country by individuals in single trips.”
The statement added that the Class ‘A‘ BDCs, whose licences had been so withdrawn were, however, free to apply for Class ‘B‘ licences with the attendant privileges by fulfilling the stipulated licensing requirements.
The CBN had in February 2009, restructured the BDCs into categories A and B in order to further liberalise the foreign exchange market and enhance its allocative efficiency.
The main objective was to facilitate end-user access to foreign exchange supply from official sources in order to boost economic growth by promoting productive efficiency of small and medium-scale enterprises.
However, stakeholders in the industry had complained that the policy only gave room for round-tripping at the expense of genuine users of foreign exchange.
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