Politicians, others hinder sales of forex to BDCs

Above: CBN's Headquarters Below: Forex 

By Akinola Ajibade

Inability of the Central Bankk of Nigeria ( CBN) to resume sales of foreign exchange (forex) to the Association of Bureau De Change Operators of Nigeria(ABCON) was caused by some prominent Nigerians and their collaborators, known as economic agents, a member of the Monetary Policy Committee ( MPC), Mr Mike Obadan has said.

CBN's Governor, Mr Godwin Emefiele, announced immediate discontinuance of sales to Bureaux de Change operators (BDCs) on July 29, 2021, due to what he describes as illicit flow of forex and its associated crimes in the country.

He, however, refused to mention the names of Nigerians engaging in such bad practices, for reasons, which may not be unconnected to pervading level of insecurity, bad governance among others, in the country. 

He said despite uncertainty in the system,  untoward practices such as hoarding of the currency is a major problem bedevilling the industry.

“Hoarding of forex is still more pronounced in the FX market amidst racketeering and round tripping, mostly perpetuated by respectable Nigerians and economic agents with ulterior motives to manipulate dollar prices in the foreign exchange market. This is the current situation with our exchange rate system. 

Adding that: “They( Politicians and Economic Agents) have refused to offload to the foreign exchange market as it were. Even if the CBN resumes sales of foreign exchange to the BDCs, the situation will not change for a simple reason,” Obadan said.

The former Director-General, Nigerian Centre for Economic Management and Administration, lamented that the major sources of forex to the country’s coffers were not yielding enough FX, including crude oil sales, non-oil sector and capital inflows, adding that proceeds from some of the sources have virtually declined.

Obadan explained: “These sources in recent times have not improved. But at the same time, you find out that the demand is skyrocketing and Nigerians at this point in time, still want to buy all kinds of goods and services from abroad, including education services, medical tourism and all that.

“The import structure or the production structure of the country is highly import dependent and Nigerians have an excessive appetite for the importation of kinds of goods and services under such circumstances when foreign exchange earnings have reduced, you find the demand for foreign exchange skyrocketing."

Continuing further, Obadan pointed out that the major problem of forex illiquidity was the comatose of the refinery, lamenting that the quantity of crude oil export sold abroad might be less than one million barrels per day of crude oil export out of the total production of 1.2 million barrels per day against the Organisation of the Petroleum Exporting Countries (OPEC) quota of 170 million barrels.

“You find out that whatever is sold by way of direct export sales is used as we are told by NNPC Limited to import petroleum products and in addition it pays subsidy. Under the circumstances, foreign exchange accretion is virtually not there, other than from perhaps, the little quantity from the non-oil sector.

“So, invariably there is excessive demand for foreign exchange against the backdrop of very low foreign exchange earnings and low capital inflow and heightened capital flights against the backdrop of monetary policy normalisation in the advanced countries, particularly the U.S,” he added.