Bureaux de Change (BDC) operators, compliance efforts and naira travails

For the first time in several months, officials of the Central Bank of Nigeria (CBN), Department of State Service (DSS), the Police and over 3,000 directors of Bureaux de Change (BDC) operators found themselves under one roof.

The emergency meeting, organised at the instance of the Association of Bureaux De Change Operators of Nigeria (ABCON), in Lagos, last week, was focused on how to strengthen the naira against world currencies, especially the dollar. It had the theme: “Role of BDCs in Price Stability- Realities and Compliance.”
The directors were advised on the need to follow sound corporate governance practices and take direct charge of their businesses, as they will be liable for any breach of CBN’s operating guidelines.

But as a show of innocence and commitment, the participants condemned the role of foreign exchange (forex) speculators in naira crisis and agreed to tackle the menace headlong to save the local currency from further depreciation.

The naira, at the weekend exchanged for N410/$ in the parallel market despite improved funding, which earlier helped to strengthen it to $380/$ in the last few weeks. The naira opened last year at N197/$ in the official market, and is today, the official rate is at N306.05/$.

The ABCON President, Alhaji Aminu Gwadabe, in his opening remarks, said CBN was determined to raise liquidity in the forex market provided the BDCs operate within set guidelines.

“The CBN has assured us that it will continue to inject more liquidity in the forex market, but BDC operators must shun speculations and other malpractices. We are expected to comply with the Know Your Customer –KYC directive of the CBN.  Stiff sanctions await any operator that breaches the CBN’s set rules,” he said.

Official-Parallel market Gap
Gwadabe said BDCs are better positioned in networking, convenient and more effective than the conventional banks in the elimination of rates disparity.

Urging the directors to help CBN reduce the gap between the official and parallel market rates, he said: “As a Nigeria, anytime I see the gap increasing, I become concerned. These gaps are created by currency speculators’ compromise. Speculators are the biggest challenge facing the naira.

“Speculation creates inflation, and the funds made through illegal means will also be spent on the problems they have created. Anytime the naira weakens, the economy suffers and there will be job losses and rise in crime rate.

“ABCON will continue to update all directors on CBN’s and other regulatory agencies’ forex sale requirements. We have a duty to reverse the negative perception many stakeholders’ have on our operations by complying with regulatory guidelines,” he said.

Gwadabe said the BDCs are in the watch list of the International Monetary Fund (IMF), World Bank and United States of America because of the critical role they play in economies of nations and cited cases where the BDC operators, had in the past, helped the CBN to strengthen the naira.

“We saw the naira appreciate from N520/$ in late January to about N380/$ after the CBN resumed sale of forex to BDCs. That was what everyone needed to know that BDCs have major role to play in naira’s stability. We have chosen to support the CBN and be part of the positive story surrounding the naira. We are happy that our contributions are paying off,” he said.

Stakeholders’ Reactions
South West Zonal Chairman, ABCON, Taiwo Ebenezer, said BDC operators are willing and ready to get information that will improve their business and economy.
He said the overall interest of BDCs is to improve the status of the naira, because the decline in value of the naira leads to higher inflation.
Ebenezer however, urged the CBN to take steps that will ensure that only BDCs sell Personal Travel Allowances (PTAs) and Business Travel Allowances (BTAs).

He said: “If the BTAs, PTAs, and tuition are left in the hands of BDCs, we will be held responsible for any abuse. But today, BDCs are not the only players in the market as the banks also operate. It is important to leave this segment of the forex market entirely for BDCs,” he advised.

One of the BDC operators, Folashade Adebayo, said all operators should unite against the forex speculators. “The speculators are giving us bad name and killing the naira. Let’s unite and chase them out of the market and save the naira,” she said.

Continuing, she said: “The challenge is how do we ensure that when speculators buy from us, they do not go to the back and sell to parallel market operators? We must devise means to stop them before they stop us,” she added.

The ABCON President, Alhaji Aminu Gwadabe, in his opening remarks, said CBN was determined to raise liquidity in the forex market provided the BDCs operate within set guidelines.

“The CBN has assured us that it will continue to inject more liquidity in the forex market, but BDC operators must shun speculations and other malpractices. We are expected to comply with the Know Your Customer –KYC directive of the CBN.  Stiff sanctions await any operator that breaches the CBN’s set rules,” he said.

Official-Parallel market Gap
Gwadabe said BDCs are better positioned in networking, convenient and more effective than the conventional banks in the elimination of rates disparity.

Urging the directors to help CBN reduce the gap between the official and parallel market rates, he said: “As a Nigeria, anytime I see the gap increasing, I become concerned. These gaps are created by currency speculators’ compromise. Speculators are the biggest challenge facing the naira.

“Speculation creates inflation, and the funds made through illegal means will also be spent on the problems they have created. Anytime the naira weakens, the economy suffers and there will be job losses and rise in crime rate.

“ABCON will continue to update all directors on CBN’s and other regulatory agencies’ forex sale requirements. We have a duty to reverse the negative perception many stakeholders’ have on our operations by complying with regulatory guidelines,” he said.

Gwadabe said the BDCs are in the watch list of the International Monetary Fund (IMF), World Bank and United States of America because of the critical role they play in economies of nations and cited cases where the BDC operators, had in the past, helped the CBN to strengthen the naira.

“We saw the naira appreciate from N520/$ in late January to about N380/$ after the CBN resumed sale of forex to BDCs. That was what everyone needed to know that BDCs have major role to play in naira’s stability. We have chosen to support the CBN and be part of the positive story surrounding the naira. We are happy that our contributions are paying off,” he said.

Stakeholders’ Reactions
South West Zonal Chairman, ABCON, Taiwo Ebenezer, said BDC operators are willing and ready to get information that will improve their business and economy.
He said the overall interest of BDCs is to improve the status of the naira, because the decline in value of the naira leads to higher inflation.
Ebenezer however, urged the CBN to take steps that will ensure that only BDCs sell Personal Travel Allowances (PTAs) and Business Travel Allowances (BTAs).

He said: “If the BTAs, PTAs, and tuition are left in the hands of BDCs, we will be held responsible for any abuse. But today, BDCs are not the only players in the market as the banks also operate. It is important to leave this segment of the forex market entirely for BDCs,” he advised.

One of the BDC operators, Folashade Adebayo, said all operators should unite against the forex speculators. “The speculators are giving us bad name and killing the naira. Let’s unite and chase them out of the market and save the naira,” she said.

Continuing, she said: “The challenge is how do we ensure that when speculators buy from us, they do not go to the back and sell to parallel market operators? We must devise means to stop them before they stop us,” she added.

He said ABCON has a zero tolerance for non-compliance with regulatory requirement and unethical conduct amongst its members. It also created the office of Compliance Officer at its National Secretariat and in all its zonal offices to discipline non-complainant operators.

“We want the BDC directors to fully take charge of their businesses, because they will be punished if anything goes wrong. We also want the public to know that BDCs are not criminals, but remain critical partner of the CBN in ensuring that price and exchange rate stability are achieved,” he said.

He praised the CBN for giving each BDC $20,000 weekly and is confident that the apex bank will raise the allocations to $40,000 in the coming weeks and urged the CBN to continue to take steps that would help bring more foreign investors to the economy.

He disclosed that the CBN was ready to further raise weekly forex sales volume and commission on transactions to BDCs as operators begin to help in driving down rates.  “We are looking at a very acceptable margin between the official and parallel market rates, say a maximum of five per cent,” Gwadabe said.

On corporate governance, Gwadabe said the CBN and security agencies are all out to ensure that sound corporate governance is followed. He urged BDC directors to show commitment to good corporate governance practices, and be transparent in rendering their accounts to the CBN.

Gwadabe called on security agencies to curb illegal currency transactions at Nigerian borders to strengthen the naira adding that recent surveillance of the nation’s boarders by combined teams of security agencies helped to cut frivolous demand for the dollar by 80 per cent.

He believes that eliminating hot money circulation in the economy will help naira recovery, promote transparency and accountability in the market. He called for harmonization and effective linkages among security agencies and between regulatory agencies and policy makers for effective and speedy naira recovery.

Gwadabe praised CBN for the unveiling Small and Medium Enterprises (SMEs) Forex Window but recommended that BDCs be involved in the transactions between $5,000 and $10,000 as practiced in other climes. This, he said, will  boost dollar liquidity and enhance the value of the naira against world currencies.

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