What lifting the ban on Forex deposits means for Bureau de Change (BDC) operators in Nigeria

The governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on Monday held a press conference in Abuja where he gave an update on recent developments in Nigeria’s foreign market. According to the CBN governor, the apex bank lifted restrictions on deposit of foreign exchange and stopped the sale of foreign currencies to Bureau de Change (BDC) due to limited foreign exchange. This announcement saw the Naira hit a record low of N300 to the dollar.

During the conference, Emefiele stated that Nigeria is the only country in the world where the Central Bank sells dollars directly to BDC operators, and instead of helping the bank achieve the objectives for which it was formed, BDC has become a source of illicit trade.

Nigeria, Africa’s largest economy, which is dependent on oil for about 75 percent of its revenue and 90 percent of foreign earnings, has been hit greatly by the fall in oil price as well as China’s economic slowdown. In a bid to save the Naira, the Central Bank has put several stringent currency restrictions over the past six months, which have had a significant impact on Nigeria’s economy. When the CBN halted forex deposits within the country, Nigerian business owners lamented that they were unable to carry out business transactions due to their inability to access foreign currency, which has become critical in Nigeria’s import heavy economy.

However, following the CBN’s announcement, BDC operators are wary of what this will mean for business. “This announcement is no good news for us since we have been forced to buy from autonomous markets. We also do not know where this restriction would get to because we have not seen the actual policy stating how we are going to get these funds apart from the press statement. The Central Bank needs to make it clear to us so we can understand the autonomous market they are referring to.” said a Bureau de Change operator who has been running his own company for the past 10 years in Lagos. 

Since the government placed these restrictions last year, the government’s foreign reserves have been depleting. According to reports last week, Nigeria’s external reserve lost about $112million. Economic experts have continued to call for currency devaluation, which they think, would have no significant effect on the economy as Nigerians are already buying goods at very high rates. During a recent visit to Nigeria, the Managing Director of the International Monetary Fund, Christine Lagarde also called on President Buhari to to be more flexible in setting monetary policies.

“Personally, I don’t support the devaluation of the Naira. We handed over a secured country in 1979, but by 1984, nobody knew how much Nigeria was owing. The situation now is aggravated by the downturn in the petroleum industry,” said President Buhari. “I will not support devaluation of the Naira. I need to be convinced that there is need for the country to devalue the Naira. Is it against the dollar or pound?”

According to economist and executive director of African Heritage Institution, Amobi Ifediora “this is actually an indirect way to let the Naira float freely to some extent so it is going to be “devalued” unofficially.”

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