The Possible Implications of the CBN Resolutions on FX (Foreign Exchange) Sales and BDCs (Bureau De Change)
At the end of the fourth Monetary Policy Committee (MPC) meeting for the year, which held on the 26th and 27th July 2021, the CBN held all policy parameters constant (MPR at 11.5%, asymmetric corridor maintained at +100bps/-700bps, the Cash Reserve Ratio at 27.5% and the Liquidity Ratio at 30%), citing the need to support economic growth while keeping inflationary pressures at bay.
In addition, the Central Bank Governor announced the following resolutions on FX Sales and BDCs during the MPC meeting.
- CBN to stop the sale of FX to BDCs with immediate effect
- No issuance of new BDCs licence
- The CBN sale of about $110 million to BDCs every week will now be channelled to commercial banks to meet genuine demand for foreign exchange.
- Going forward, commercial banks should reorganise their operations to cater for customers who require FX for legitimate purposes.
- Banks must make every effort to meet genuine demand as soon as possible while those who are not able to access FX can report to the CBN via its official contact details.
The resolutions were as a result of the shortcomings noticed by the CBN which include the huge rent-seeking by BDC operators who are only interested in wide margins, dollarization of the Nigerian economy, subversion of the CBN’s cashless policy, prevailing ownership of several BDCs by the same owners in order to obtain FX multiple times and regrettably international organisations and embassies patronage of illegal forex dealers. With this move, the CBN seeks to rein in speculative demand for foreign exchange and address the challenge of meeting all genuine demand. The CBN Governor also threatened to crack down on banks still dealing illegally with unauthorised forex traders and urged the international organisations to participate in the I&E window.