Early this week, the Central Bank of Nigeria (CBN) issued the Bureaux de Change (BDCs) in the country what is known in the sports world as the red card. It made it clear that henceforth, it will not sell foreign exchange to them as was hitherto the case. The apex bank also halted the approval and licensing of new ones as it cancelled fresh applications and returned monies already collected. These were part of the decisions arrived at during the latest Monetary Policy Committee (MPC) meeting held in Abuja. Addressing the media at the end of the meeting, the Governor of CBN, Mr Godwin Emefiele, gave some reasons why the decision to exit the BDCs from official foreign exchange transactions had become inevitable.
He said that the money changers were in the habit of flouting regulations guiding their operations. For instance, he pointed out that the legal instrument regulating the business stipulated that each bureau should sell a maximum of $5,000 per day. But this was not the case as most of them sell millions of dollars per day mostly from unclean sources.
As if this was not bad enough, the CBN chief disclosed that the BDCs aid illicit financial flows and other financial crimes such as money laundering. Recently, it was also reported that they had started benefitting from the nefarious business of kidnapping as the ransom demanded and paid to kidnappers find their way to this market where the kidnappers and their agents change the huge money received as ransom from naira to dollar making it difficult to trace by security agencies.
Emefiele also lamented that the operators of what is euphemistically referred to as the foreign exchange black market had created a scenario that resulted in a haemorrhage of the nation’s scarce resources as they turned themselves into agents that facilitate graft. He noted that while these under the table deals were going on and flourishing, Nigerians continued to suffer in pain due to inflation occasioned by the infusion into the monetary system of unaccounted funds.
In the opinion of this newspaper, the decision of the apex bank is belated. It should have come sooner. It is indisputable that all the negative aspects of the business that Emefiele pointed out were not recent developments, they have been there creating avenues for multiple exchange rates that have proved to be harmful to the economy aside from making it a lot challenging to manage the forex market. This black market created room for round tripping, that is buying foreign currencies at official rate and selling at the black market rate taking undue advantage of the wide gap between the two rates.
But it is better late than never. It must have taken moments of rare courage for the CBN to arrive at the decision at all considering the powerful forces behind the illicit operations. Having said this, we are also worried that the banks to which the CBN is turning to retrieve the proverbial chestnut from the fire are not entirely clean enough to be saddled with the responsibility of playing such a huge role in the foreign exchange management system. If anything, in our view, the banks are part of the problem certainly not a solution.
We recall that soon after the Babangida administration deregulated the financial sector, banks mushroomed just to buy and sell foreign exchange. There was no concerted effort on their part to indulge in real banking practices that would have helped build and develop the economy. The banks used the cheap forex to finance imports and other businesses that play very little role in building the nation’s Gross Domestic Product (GDP). It was no surprise that the failures that took place soon after almost eroded the confidence of the average Nigerian in the banking sector.
And that is the fear most Nigerians are beginning to nurse as the CBN proceeds with this policy of making banks the be all and end all as far as foreign exchange transactions are concerned. They are apprehensive that the apex bank is about to replace one rogue with another. This obvious discomfort becomes palpable with the report that banks, too, are linking up with the bad guys who control the cheap funds from criminal activities. Regardless of all the pretentions to the contrary, the banks are the engine room of illicit transactions hiding under the cover of customer confidentiality. What is required at this time is effective regulation. Stringent rules must be put in place such that any deviation from the norm shall be coldly and dispassionately dealt with.
It is imperative, in our considered opinion, that Emefiele and his management team put in place measures that will reassure Nigerians that their needs as far as foreign exchange is concerned will be hassle-free. That a customer with a genuine request for foreign exchange will not be expected to present a horn of a dog or the egg of a cork. Furthermore, the CBN must make the banks to understand that it will not be business as usual.