BDC Operators Accuse Banks of Not Selling Dollars As Naira Crashes Further Against US Dollar
- BDC traders have accused commercial banks of not selling dollars to them despite directives from the CBN
- The traders believe that the lack of forex available to them is one of the reasons the naira will struggle to maintain stability
- In recent days, the naira has reversed its gains against the US dollar in the foreign exchange markets
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
Bureau de Change (BDC) operators in Nigeria have accused commercial banks of failing to sell foreign exchange to them.
They believe that this situation puts the naira in a precarious position in the foreign exchange markets.
Source: Getty Images
Aminu Gwadabe, president of the Association of Bureau De Change Operators of Nigeria (ABCON) who raised the concern said BDCs are grappling with limited availability of forex in a chat with Legit.ng.
He also said that some of the banks managing to sell are offering unfavourable rates, and lower margins which is creating business uncertainties
He noted that these factors have combined to fuel currency substitution and speculative activities, leading to the weakening of the naira.
His words:
'While the banks are offering a weighted average of N1505/$ the parallel market levels were at N1503/$ which even make the BDCs constrained to buy from the Banks.
"It is for the CBN to issue a prudential percentage on volumes of sales on Diaspora’s remittance, portfolio investment proceeds by banks to BDCs to continue to usher in supply and thereby discouraging the illegal economic behavior of currency substitution, speculation and discretionary demands that are frivolous in nature."
Source: Getty Images
Gwadabe called upon the CBN to refine its actions in the retail foreign exchange market via BDCs to tackle these challenges effectively.
He said:
"It is for the CBN to issue a prudential percentage on volumes of sales on Diaspora’s remittance, portfolio investment proceeds by banks to BDCs to continue to usher in supply and thereby discouraging the illegal economic behavior of currency substitution, speculation and discretionary demands that are frivolous in nature."
Naira to dollar exchange rate
The pressure on the naira persisted as it recorded a sharp decline in both the official and unofficial markets.
In the parallel market, commonly known as the black market, the naira fell to as low as N1,580/$1. In the official foreign exchange (FX) market, the naira depreciated by N43 on Friday, with the dollar quoted at N1,542/$1 compared to N1,499/$1 on Monday.
BusinessDay reports that the FMDQ Securities Exchange Limited reported that the naira weakened to N1,512.30/$1 at the Nigerian Foreign Exchange Market (NFEM), down from the previous close of N1,500.80/$1.
Foreign exchange reserves drop
According to an earlier report by Legit.ng, the CBN has disclosed that Nigeria's foreign reserves have decreased to around $38.88 billion.
This latest figure is $2.2 billion when compared to the $40.88 billion the reserves stood at at the beginning of January 2024.
There are expectations that the FX reserves will decline further as CBN moves to clear forex obligations.
PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ find the “Recommended for you” block on the home page and enjoy!
Source: Legit.ng
Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.
Aminu Gwadabe (President at Association of Bureaux de Change Operators of Nigeria) Alhaji Aminu Gwadabe is the president of the Association of Bureau De Change Operators of Nigeria (ABCON) that represents the interests of licensed Bureau de Change operators in Nigeria. Gwadabe comments on issues relating to the foreign exchange market, currency exchange rates, and economic policies in Nigeria over the years.
