BDCs urge CBN to relax grip on exchange rate

Estimated reading time: 3 minutes

Nigeria’s Association of Bureaux De Change Operators (ABCON) — the BDCs — is pressuring the Central Bank of Nigeria (CBN) to loosen its control over foreign exchange rates.

In a letter obtained by NRTC, ABCON President Aminu Gwadabe requested a downward adjustment of the official exchange rate for Bureau De Change (BDC) operators.

This appeal comes amidst a widening gap between the CBN’s designated rate and the prevailing market rate for US dollars. The CBN currently sets the buying rate for BDCs at N1,251 per dollar, with a 1.5% markup allowed for selling. However, the parallel market, which operates outside official channels, is currently offering dollars at a lower rate, around N1,235 per dollar.

“We discovered a worrisome development where many of our members who paid for dollar allocations at N1,251/$ with a margin of 1.5 per cent are yet to receive their disbursement. This is happening in the face of the prevailing open market rate of N1,235/$, which is lower than the authorised applicable exchange rate by the CBN to the BDCs,” the letter said.

Read Also: BDC industry faces consolidation pressure as CBN proposes new guidelines

Gwadabe argues that the CBN’s rate is too high due to the recent appreciation of the naira. This has made it difficult for BDCs to compete with unofficial forex providers, leading customers to bypass them for cheaper options.

The situation raises concerns about the effectiveness of the CBN’s intervention strategy and its potential to unintentionally push foreign exchange transactions back into the shadows of the unregulated market.

He added that ABCON’s forecasts in the ongoing market development indicated a willingness of the market to correct itself with realistic price discovery as the naira is forecast to continue to appreciate further across the market with the increasing sources of foreign exchange inflows aided by the CBN policies.

“It is in view of the above market developments that we write to appeal to your good selves for readjustments and review downwards of our funding rate of the last tranche (2nd bidding) from N1,251/$ further down to reflect current market rate discovery.

“This became imperative as it is only the consideration of the readjustment downward that will enable our members to upload their holding positions,” he noted.