Commercial banks divert $10b to unlicensed BDCs – The Nation

dollar to naira

Banks are diverting dollar sales previously allocated to licensed Bureaux De Change (BDC) operators to unlicensed BDCs or currency hawkers, an investigation by The Nation has revealed.

An estimated $10 billion may have been sold by the lenders to the currency hawkers in the last four months under the dubious arrangement.

During investigation at bank branches in Ikeja, Ogba and Maryland, and Broad Street in Marina, currency hawkers were seen making huge cash (naira) deposits into their accounts to enable them obtain dollar from the lenders.

Much of the funds, sourced by the banks from unofficial sources especially from the International Oil Companies (IOCs), Diaspora remittances, and dollar earnings by Nigerians at home, is sold to currency hawkers at higher margins of between N280 and N290 to dollar.

The currency hawkers are not guided by Central Bank of Nigeria’s (CBN’s) rules on quarterly foreign exchange (forex) returns filling.

A BDC source told The Nation that the 3,000 licensed BDC operators have not only lost over N12 billion in the last four months since the CBN stopped weekly dollar allocations to them, but have not been able to sustain their once thriving businesses.

The source said annual Diaspora remittances to Nigeria alone are estimated by the World Bank at $20.8 billion, even as the BDCs are being denied access to the funds.

The source accused the CBN of closing its eyes to the malpractices in forex market including outright refusal to monitor the rates at which the dollar is sold in the autonomous market.

When contacted, CBN Acting Director of Communications, Isaac Okoroafor, said the regulator does not control transactions taking place in unofficial markets.

He said: “The interbank market is a segment of the market where we control. There are other sources of getting forex. We can’t control the unorthodox market because as more dollars come in, it helps to moderate the exchange rate.

“We do not control how banks sell dollars sourced from the unofficial sources. We are not in anybody’s bedroom to see how they get their dollars and how they sell them. But the ones under our control, we look at how they obtain the dollar and how they sell them. And the rules are there, they are all published”.

President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe confirmed that licensed BDCs are the biggest losers under the CBN’s forex sales policies.

He told The Nation that an average licensed BDC operator makes a minimum of N1 million profit monthly and files returns to the CBN on all its transactions. This comes to average of N3 billion monthly for the 3,000 licensed BDCs.

“The stoppage of dollar sales to licensed BDCs is now in its fourth month, has shown that our members have lost N12 billion within this period and there is nothing being done by the CBN to cut these loses,” he said.

“As a group, we condemn the practice. People that previously condemned BDCs are now conniving with banks in ripping off the economy pretending that everything is fine. They should be called to order. As a licensed BDC, I should be allowed to sell dollars to my customers provided I provide genuine documentation. Banks that are supposed to advocate transparency are the ones violating the rules of the game,” he said.

ABCON has under Gwadabe, held several meetings with the CBN management on the need to bridge dollar liquidity crisis by sourcing petrodollars from IOCs and other autonomous sources and selling to licenced BDCs at controlled prices. The CBN also promised to directly intervene in selling dollars to the BDCs when market liquidity improves but this is yet to be done.

“We have held meetings with the CBN and sent proposals to them on the matter. Licensed BDCs should be made agents of payment, and should be allowed to receive Diaspora remittances funds. That market still remains largely untapped. We have also accepted to ensure that our members follow the regulatory guidelines and not sell dollars obtained through the autonomous sources over the required margin,” he said.

Gwadabe explained that the BDCs do not have the capacity to deal directly with the IOCs because of the intricate nature of the transactions, but will rely on the CBN’s expertise and experience to handle the transactions.