Local manufacturers under the auspices of Manufacturers Association of Nigeria (MAN) have stated that the recent decision by the Central Bank of Nigeria (CBN) to halt foreign exchange (forex) sales to Bureau De Change (BDCs) operators is unanimously supported by the association as it will eliminate excesses of middlemen, enhance value of the naira and allow available forex to be allocated productively using the official banking protocols.
The Director-General of MAN, Segun Ajayi-Kadir, while stating the association’s position in a release made available to New Telegraph, said MAN had written numerous letters to the CBN hierarchy on the need to collapse the various forex windows into a single on in order to ensure smooth distribution of forex nationwide.
He explained that the dominance of the BDC market had an unpleasant implication for the manufacturing sector. To him, manufacturers source forex from the BDC window at exorbitant cost, notwithstanding the consequent implication on cost of production and competitiveness of the sector.
Speaking on the ban, the MAN DG said: “A major challenge to forex allocation to BDC segment is that the operators always lack the ability and will to continuously adhere to set guidelines.
“Most times, their operations drift into round-tripping and other financial incongruities, which negates the overall objectives of creating the BDC forex market.
“The end result was always the escalation of the premium of forex in BDC compared to the official window and further depreciation of the naira. “Perhaps the history of the BDC forex market may have the answer to this challenge.
The truth is that most of the operators in the BDC market came from the so-called ‘Black Market.’ “Unfortunately, the inappropriate modus operandi in the black market followed these operators to the BDC, even with CBN’s regulation.”
Ajayi-Kadir stressed that an observation of the forex market scenario showed that in 2019 CBN forex allocation to BDC’s was about $12.65 billion and only $1.33 billion to the Interbank, while the premium of BDC rate to that of Interbank averaged 17 per cent in the last three quarters of the year.
He, however, added that the trend may suggest that forex operations at the BDC market have gone out of control