How converging FX rates have become a problem for BDCs
Bureau wants CBN to review exchange bands
Stella Mbah | Tuesday, 09 January 2018 11:08am | economy
Nigeria’s multiple exchange rates have come closer to converging in the past few months, and this has presented the country’s licensed Bureau De Change (BDC) operators with fresh problems of unfavourable transaction charges and business profitability.
The Bureau is calling for an emergency meeting of its members to discuss critical issues in the foreign exchange market, the association expressed its intention of convincing the central bank to reduce rising bank charges associated with their transactions.
The Bureau lamented that while rates have converged between the BDCs and Parallel market, the businesses of the BDCs have also come under pressure because of high transaction charges in addition to customers’ preference for parallel market where no documentation is required.
A statement by the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, says that BDCs are charged N1,000 per million naira transaction, costing each operator as much as N67,000 for the N67 million monthly transactions. “These charges are too high,” he said.
Gwadabe observed that the challenges facing the BDCs were enormous, noting that many forex users preferred to patronise commercial banks for Business Travel Allowances, Personal Travel Allowance, medical bills and school fees payment abroad in place of the ABCON members.
The statement read in part, “The exchange rate at both the parallel market and the BDCs segment closed at the weekend at N361/$1. The attractive rate at the parallel market has triggered a massive influx of demand from forex users who are running away from the mandatory regulatory documentations sought by the BDCs.
“Many forex users prefer to buy at the parallel market instead of the BDCs because there are no longer rate gaps. They prefer the parallel market where there is no single documentation required. That is why we are calling on the CBN to review the rate band for the BDCs.”
According to him, the challenges, if not checked, would trigger a liquidity crisis that may derail the on-going recovery of the naira against the dollar. “We want the CBN to review the BDC rate to ensure that currency speculators do not return to the market. Remember the BDCs buy dollar at N360/$1 from the International Money Transfer Operators (IMTOs),” he said.
The meeting is scheduled for Wednesday, January 10 at Gloval Hall, Lagos and will be attended by over 3,500 Central Bank of Nigeria (CBN)-licenced BDCs and members of ABCON. The main agenda for the meeting will be on the convergence of the BDC rates with the commercial banks’ rate, the rising bank charges associated with BDCs’ transactions and the need to tackle the spate of unregistered currency retailers in the forex market.
Other issues will include the review of yearly license renewal, payment of Company Income Tax, Value Added Tax as well as the approval of additional forex disbursement centres in Port Harcourt, Maduguri, Benin and Ibadan.