Scarcity of hard currencies may again rear its ugly head at the foreign exchange (Forex) market unless the ongoing face-off between the banks and the Bureaux de Change (BDCs) operators are amicably resolved.
Recall that th banks, acting on the behest of the Federal Inland Revenue Service(FIRS),last week placed ‘Post No Debit’ order on the accounts of the BDCs operators pending the receipt of further instructions from the FIRS.
This was sequel to the directive of the tax authority that BDCs pay taxes on funds used to bid for dollar allocations with the Central Bank of Nigeria (CBN) on weekly basis through the commercial banks.
A letter from one of the commercial banks to a BDC, stated: “The bank has, pursuant to section 49 of the Companies Income Tax Act LFN 2004 and Section 28, 29 and 31 of the Federal Inland Revenue Service (Establishment) Act No. 13 of 2007, been appointed by the Executive Chairman of the FIRS as collection Agent over your accounts.
“Please be informed that consequent on this directive, we are compelled by law to place ‘Post No Debit’ on your account pending the receipt of further instructions from the Executive Chairman of FIRS. This is for your information and necessary action as you are best advised to contact the FIRS officials”.
This did not go down well with the association of the forex dealers- Association of Bureau De Change Operators of Nigeria (ABCON), whose President, Alhaji Aminu Gwadabe, appealed to CBN to call the banks to order.
Hear him: “The BDCs are high turnover sector and their funding cash for dollar collections cannot be subjected to taxes. An average BDC does over N30 million weekly turnover and paying taxes on such funds will affect their cash flow and ability to meet their statutory role of foreign exchange supply to the retail-end of the market,” he said.
He lamented that many of the affected BDC operators are already facing major funding challenges that need to be addressed immediately by concerned stakeholders.
“In fact, we will be writing to the Central Bank of Nigeria –CBN- to complain about the illegal policy of the ‘Post No Debit’. Presently, most of our members funding with the deposit money banks for their bidding obligations are being trapped in the banks. This scenario if not checked, will affect our members funding capacity, derail the sustainability of their businesses with the resultant liquidity spikes.
“The banks did not ask the BDCs to bring evidence of tax payment before they act.
“Value Added Tax (VAT) Exempt for BDCs is applicable in other climes and should also be practised in Nigeria. The non-implementation of tax exempt in Nigeria is affecting the capacity of BDCs to effectively meet the foreign exchange demands at the retail-end of the market,” he said.
Gwadabe said the BDC sector is critical for continued stability in the foreign exchange market adding that the working of many developed economies is highly dependent on the activities of BDCs and Nigeria should not be an exception.
He said the BDCs have so far stamped their role as key players in the foreign exchange market, where they remain major economic drivers creating employment and wealth for Nigerians.
Some stakeholders have expressed fears that this might again cause arbitrage,as last witnessed early last year when more than N500 was exchanged for just one dollar, at the Forex market.
However, analysts with an investment and Stock brokerage firm, Cordros Capital, dismissed such fears in their Weekly Economic and Market Report.
According to them, “despite continued decline in the foreign reserves, our outlook for the FX(forex) market remains stability, as oil prices remain at comfortable levels and production remains stable, aiding inflow of oil revenues, which provide the apex bank sufficient legroom to sustain its interventions in the currency space.”
Corroborating this, Isaac Okorafor, the CBN spokesman, has pledged that the CBN would ensure that customers in all sectors of the forex market are guaranteed access to required foreign exchange.
Okorafor who said this in a statement last Friday when apex bank injected a total sum of $543.22 million and CNY 63.21 million into the inter-bank foreign exchange market, had attributed the relative stability in the foreign exchange market to the intervention of the CBN as well as the sustained increase in crude oil prices in the international market.
Last May, the apex bank directed all commercial banks in the country to sell foreign currencies to all customers over-the-counter whether the customer had an account or not.
To ensure compliance, its Governor, Godwin Emefiele, made an unannounced visit to some banks in Abuja .He said that all the banks were well stocked and whoever want to make foreign exchange transaction should look for the “BTA/PTA counter’’ or “Bureau de Change counter’’ located in all banks’ branches:
“The essence of us being here is to make sure that the banks are able to service not just their customers, but also those who are not their customers, particularly those who want to travel outside the country. There is ample liquidity for any eligible traveler and nobody should fall into the temptation of buying BTA or PTA from a bank at more than N360 to a dollar.
“I want to seize this opportunity to let everybody know that there is dollar availability. If you want to travel, go to a bank. It doesn’t have to be your bank.Whether you have an account or not, you should be attended to.
“Just work into any bank with your travel document, show your Visa and air ticket. They will ask for your BVN and once they verify it, they should attend to you on the spot.
“Nobody should go home and come back because he or she wants to buy foreign exchange. You should be attended to immediately and that’s what over-the-counter means,’’ he said.