Ban on direct dollar sale to BDCs - Punch Newspapers

THE ban last week by the Central Bank of Nigeria on direct sales of foreign currency to bureaux de change hit the financial markets like a thunderbolt. Upending a controversial policy, the CBN emerged from its regular Monetary Policy Committee meeting to announce immediate stoppage of the weekly direct allocation of United States dollars to the BDCs and moved to enhance the capacity of deposit money banks to supply foreign exchange to both wholesale and small end-users.

The bank, the government and its law enforcement agencies have tolerated the BDCs and their irregularities for too long. Complaints against the BDCs range from massive money laundering, hoarding and alleged conduits for the funding of terrorism, kidnapping, piracy, and drug trafficking. They feature prominently in corruption trials, exposed along with DMBs as accessories to treasury looting. They violate the rules, including maximum trading limits and profit margins.

Financial sector operators and businesses initially feared that the move would further starve producers of forex, depress the naira even more, promote the black market and worsen inflation. Their fears were justifiably hinged on the notorious corruption, red tape, and inadequacy of the DMBs to cope with the sheer volume of retail demand, coupled with the equally well-known lax bank supervision by the CBN. Truly, the naira depreciated, falling from N501 to $1 and N522 to $1 within 48 hours.

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