Call to liberalise forex market

Some operators of bureaux de change (money changers or BDCs) in Nigeria are of the view that recent policy changes by the Central Bank of Nigeria (CBN) may not be successful.

Following the CBN Monetary Policy Committee meeting held last Thursday, a statement was issued saying that the Bank decided to reverse its monetary and foreign exchange market policies.

Gali Suleiman Kabiru, the chairman of the Hausa faction of BDC operators in Marina, Lagos State, in his remarks on the reforms on Tuesday explained that the aim of the CBN was just to capitalise the market.

“These people just want to capitalise this Forex market. The market would in the long run be for the rich, the poor would be edged out. The rich would become richer and the poor would become poorer. Where do they want us to get ₦500 million to use as capital base to qualify for class A?

“It is obvious that those that would get the money would either be connected to the banks or to top politicians. In fact, any citizen, without those options should be arrested. Where did the person get that amount of money from? What kind of business did he do? It is money laundering. This policy will still cause a lot of Inflation.”

“Out of the about 1000 BDCs in Nigeria, only 50 were approved. What difference would that make? If they open all the markets, sell to banks and all the BDCs, before you know what is happening, dollar would fall badly and would exchange for maybe ₦100 or even lower. Nobody would be interested in keeping the dollar, when everyone has,” he said.

Three months after the CBN had said that the licencing requirements of the BDCs have been reviewed and that the BDCs would now be operating under two categories, Class A and B, the regulatory body finally approved 50 non-bank BDC’s to operate under the Class A category on Monday.

So far, only BDCs operated by banks have qualified for the Class A category.

The requirement for this class includes a minimum paid-up capital of ₦500 million verifiable at all times, a mandatory deposit with the CBN of $200,000.00, non-interest bearing, a non-refundable application fee of ₦100, 000, licencing fee of ₦1 million, an annual renewal (subject to satisfactory reporting requirements and performance fee of ₦250,000 and a minimum IT infrastructure that enables the BDC to make daily returns to the CBN.

Operators under Class B, under which about 90 percent of BDCs would automatically operate under, are required to operate under the previously existing guidelines.

They are also to carry out the following transactions: Business travel allowance (BTA), personal travel allowance (PTA), buy foreign exchange from autonomous sources, (as opposed to buying directly from the CBN until about 4 months ago), sale of foreign exchange to end-users subject to a maximum limit of $5,000 per transaction.

The CBN also said that all Class A BDCs (bank and non-bank) can access the CBN window to buy foreign exchange (cash) every week. The amount to be offered for sale shall be communicated every Monday of the week.

The BDCs are expected to retail the funds at a rate no more than 2.0 percent above the CBN selling rate. The market day for the BDC operators is Tuesday of every week commencing from Tuesday, May 26, 2009.

The operations of the Retail Dutch Auction System, which is currently daily will be operated twice a week (Mondays and Wednesdays) with effect from June 1, 2009.