By Omodele Adigun , Steve Agbota, Merit Ibe (Lagos) and Uche Usim ( Abuja)

It came like a thunderbolt! It was, indeed, unexpected as the Central Bank of Nigeria (CBN) last Tuesday wielded the big hammer as the apex bank stopped foreign exchange (forex) sales to Bureaux de Change (BDCs) operators in the country.

According to the CBN governor, Godwin Emefiele, operators in the BDC have become renegade, greedy, recalcitrant and making abnormal high profit from forex, leaving ordinary Nigerians to suffer.

Emefiele, who announced the end of forex sales and new licence approval after the Monetary Policy Committee (MPC) meeting in Abuja, said: “Operators in the BDC have not reciprocated the gesture to help maintain price stability in the market since the CBN had been selling forex to them.They have remained renegade and so greedy, recalcitrant with abnormally high profit from these sales while ordinary Nigerians have been left to feel the pain and, therefore, suffer. 

“Given this rent seeking behaviour, it is not surprising that since the CBN began to sell forex to the BDCs, the number of operators has risen from mere 74 in 2005 to over 2,700 in 2016, and almost 5,500 BDCs as at today. In addition, the CBN constantly receives nothing less than 500 new applications for BDC licences every month, and we, therefore, begin to wonder, what is in this business that everybody must be in it? The Central Bank will henceforth discontinue the sale of forex to Bureau de Change operators.”

While noting that the BDCs have become a fulcrum for corrupt Nigerians to launder money to wreck the economy, Emefiele stated that commercial banks are mandated to immediately and transparently sell forex to end users who present the required documents, saying all banks are to immediately create dedicated tellers for that purpose.

He said that the CBN would channel weekly allocations of dollar sales to commercial banks to enable them meet legitimate foreign exchange demands. 

Since the announcement, scarcity has hit the forex market, causing exchange rate to jump. According to, the official websites of the BDCs, the Naira, which exchanged to the dollars at N503/$1 on Monday, was bought and sold for N503 and N505 on Tuesday evening. On Wednesday, it fell significantly against the U.S. dollar and other major foreign currencies. Data obtained from, a website that collates parallel market rates, revealed that the Naira, which opened Wednesday’s trading session at N505 per $1, fell to N522 to a dollar at the parallel market segment, implying a N17 or 3.40 per cent value erosion from N505 at which  it closed at the previous session of the black market on Tuesday – its biggest fall since February 2017. At the Importer and Exporter (I&E) window, the dollar traded for N411.52 per dollar. Similarly, the  Naira was exchanged at N710/Pound Sterling as against N700 at which it traded on Monday, while it exchanged for N600/1 Euro as against N590 traded previously.

However, it moderated slightly on Wednesday, as it dropped to N520 per $1 as at midday at the parallel market.

Thunderstruck by the threat of the apex bank , most of the BDC operators have literally gone underground.

But on Thursday, the Association of Bureaux De Change Operators of Nigeria (ABCON) assured the members of the public that Bureaux De Change (BDCs) are still providing foreign exchange services.

ABCON President, Aminu Gwadabe, who  gave the assurance, said that the  recent pronouncement of the Central Bank of Nigeria does not stop BDCs from providing foreign exchange services as allowed by  their operating licenses and also in their operating guidelines.

He said: “BDCs are licensed to provide retail FX services,  including buying from the public and also selling to end-users for allowable transactions namely Personal Travel Allowance (PTA), Business Travel Allowance (BTA), payment of medical and school fees.”

He added that while the dollar sale from CBN had helped in enhancing supply, the fact remains that BDCs are empowered to source FX from other sources and also to provide various services to members of the public.

“While the CBN has stopped dollar sale to BDCs, it has not cancelled their operating licenses, or banned them from providing FX services to members of the public.

“At ABCON, we urge our members to see the CBN pronouncement as a wake up call and opportunity to widen their customer base and deepen their business.

“ABCON has always worked with the CBN to ensure proper working of the FX market and in line with this principle, we will engage with the apex bank to address and resolve  all the issues that led  to the recent action, including identification and sanctioning of earring BDCs, where necessary.

“In addition to this, and in view of the fact that BDCs have been  very effective in ensuring stable exchange rate, ABCON will work with relevant stakeholders, including law enforcement agencies to develop a National BDC policy with the aim of enhancing the contribution of the BDC subsector to the nation’s economy”, Gwadabe said.

Meanwhile, financial experts have advised the apex bank to quickly come up with a policy or a window so that there would not be erratic devaluation  (or depreciation) of the local currency. 

Mr Johnson Chukwu, managing director, Cowries Assets Management, Limited, warned that if no such quick intervention is done, “whatever objective the central bank wants to achieve would have been defeated.”

His words: “We need to introduce other policies so that this does not lead to sharp and erratic increases in the exchange rate. For instance, there have to be a policy to ensure timely delivery of foreign exchange (forex) to legitimate customers who are satisfying their demands from the BDC market. So, CBN has to create a window for small and medium-scale businesses that need quick access to forex, who were resorting to the BDCs’ window because they couldn’t go to the official window. 

“I think the central bank needs to come up (with policy) for small time traders that need $20,000, $30,000; $40,000, $60,000 to build their trade; people who are paying school fees; people who are paying for things like shipping company charges, NPA charges, NIMASA charges that are denominated in foreign currencies. 

“So, we need to create a window for them to access forex at a very short notice. Otherwise, they would have to resort to the black market and the price of forex will increase. The banks under the current structure would not meet their demands; their needs. And they would be forced to go back to the parallel market where forex supply would have dried up.And they would give them at high prices. If you go to Abokifx, you would discover that the exchange rate has moved between yesterday and today (Tuesday and Wednesday). 

“So, they have to create a window so that we would not see erratic devaluation  (or depreciation) of the local currency. If that happens, whatever objective the central bank wants to achieve would have been defeated.”

Also analysts have asked the CBN to go beyond titillating Nigerians with the forex ban and ensure that banks do continue with the nefarious activities of the BDCs by hoarding forex and selling it illegally to their cronies masquerading as bank customers.

These notwithstanding, the former Director General of the Lagos Chamber of Commerce (LCCI), Dr Muda Yusuf, picked holes in CBN’s move, saying it was reacting to symptoms, rather than tackling the virus.

He linked the rough air currently experienced in the foreign exchange market to the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex. 

“It is a policy regime that has created a huge enterprise around foreign exchange – round tripping, speculation, over invoicing, capital flight etc.

“The action of the apex bank amounts to tackling the symptoms rather than dealing with the causative factors, which is not a sustainable solution. 

“It is regrettable that the CBN does not believe in the market mechanism. Yet market systems are time tested as instruments of efficient resource allocation in leading economies around the world. Of course, market failures are recognised in economics, and these are exceptions that can be identified and dealt with. Suppressing the market is like swimming against the tide. It is a difficult battle to win.

“Moving retail forex transactions from BDCs to the banks is like kicking the can down the road. The same issues would manifest even with the banks. Managing a subsidy regime is typically a herculean task. We have seen this happen with fertiliser subsidy and petrol subsidy. The story cannot be different with foreign exchange. 

“The way out of this foreign exchange conundrum is for the CBN to allow the market to function. It is also imperative for the apex bank to de-emphasise demand management and focus on strategies to stimulate forex inflows. A fixed exchange rate regime is a major disincentive to inflows and creates enormous pressure of demand for forex. It is a contradiction in terms”, he said.

Also reacting, Nigeria’s first professor of the capital market, Prof Uche Uwaleke told Sunday Sun that the decision by the CBN to stop forex sales to BDCs has merits and demerits.

“Having said that, I think it is in the best interest of the Nigerian economy. On the positive side, it is consistent with the move by the CBN to unify exchange rates and bring more transparency to the forex market. Exchange rate unification is in line with the IMF and World Bank’s recommendations and so improves the country’s profile and credit standing before International financial institutions. It signifies that the country is serious in her reform efforts.

“It will slow down the rate of depletion in external reserves. The move is likely to check round tripping of forex and reduce supply of forex in the parallel market.

“Further, speculative demand for forex is also likely to reduce. I am aware that BDCs have been accused of being vehicles for bribery and corruption. This will likely be reduced.

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“On the flip side, this measure will wipe out the employment opportunities created in the sector with over 5,000 BDCs with several others waiting to be licensed.

“Also, the gap between the AFEX rates and parallel market rates is likely to widen further with dollar shortages in BDC and parallel market segments”, Uwaleke explained.

He advised that going forward, the CBN should ensure that the purchase of forex via the banks which will now increase is made stress free with minimal documentation. 

“This is what pushes people to the parallel market”, he added.

Nonetheless, members of the organised private sector (OPS) have raised concerns over the BDC Forex ban, describing it as one which would fracture the real sector of the economy.

The private investor group said that the action would further lead to forex squeeze as well as possible round tripping.

They said the move would further catalyse hoarding, while more manufacturers, exporters and importers would ache due to artificial dollar scarcity that would cause astronomical price spike. 

Indeed, the Vice President, Association of Nigeria Licensed Customs Agents (ANLCA), Kayode Farinto, said that the issue of dollar is the problem in the country, adding that every Monday, there are some individuals that were  just given dollars to sell.

He said that the individuals would collect at official rate and sell at black market, adding that the CBN’s ban is not the best way to handle the situation.

On the capacity of the banks to sell dollar to the end users in the country, he said that the banks are not liquid enough to supply dollars because over 50 per cent of hard currencies in the country are in the hands of individuals and banks have less than 20 per cent forex.

“So the only thing that will happen is artificial scarcity. You are indirectly giving BDCs power to increase exchange rate. In the next one month, it will go up to N1000 because even CBN that is supposed to regulate this, how much dollars does it have in its stock?

“If you have the dollars in your storage, that is when you can cushion the effect of scarcity to give to genuine people who want to import. The CBN itself does not have the dollars,” he pointed out.

He added that  there is no way CBN can regulate the situation because the level of  dollars in circulation in individual hands now is more than 70 per cent.

“Some people can say if CBN is mad, let’s not sell our dollars in the next one month or two months and there will be artificial scarcity. By the time they are ready to sell, they will still sell at a very high rate. Unfortunately, the drivers of the economy of this country are not getting it right. The suspension of BDC is not the solution and not the panacea of the problem we have in the country,” he stated.

He advised that the only solution is if the CBN can boast of having $20 million in its coffers it can give to genuine importers.

However, the National President, Africa Association of Professional Freight Forwarders and Logistics in Nigeria (APFFLON), Otunba Frank Ogunojemite, said that Nigeria is an importing nation, and naira is getting weaker, adding that for one to buy dollar, it costs more naira.

He said that at the end of the day, when consignments arrive in Nigeria, it would cost an inflation, adding that per capital income is not increasing.

According to him, if people cannot import, the prices of goods in circulation will be trippled and  the consequence will not be palatable, adding that the situation needs intelligence solutions if the government wants the Nigerian economy to be stable because it seems the government is losing control of the economy.

He said that there are a lot of things that the government needs to put in place if they want things to be all right because now the Naira is about 520 per dollar at the black market. 

He said that if there is no demand, there is no way the dollars will be rising in the black market, adding that since the dollar is rising, that means the demand is more than the supply.

He said that the dollar has kept rising in the country for the past two years, saying that government is not doing anything to ameliorate the situation. 

“So eventually, it is the government that is actually hoarding it, that is my concern because this is so worrisome. The vice president, Yemi Osibanjo, is the Chairman of the Economic Committee, they should give us a direction. At the end of the day, if the Naira keeps losing power, Nigeria will be a dumping ground and people will not be able to buy the dollar.

“To be honest, this is a very sensitive situation now that Nigeria has joined AfCFTA. Government should look at this issue holistically and the governor of CBN should collate reactions from the people because you cannot determine how you are going to buy dollar tomorrow. If the government is selling the dollar, there is a limit of dollar one can buy from the bank,” he pointed out. 

Meanwhile, manufacturers have lamented that their fate is hanging in the balance in  accessing forex from  the commercial banks .

The manufacturers predicted more woes for the real sector of the economy, noting that the move would further accelerate hoarding and more manufacturers, exporters and importers would also experience stifling forex allocation from the commercial banks, which will result in more forex squeeze in the country. 

The manufacturers under the Manufacturers Association of Nigeria (MAN) emphasised the need for the apex bank to properly monitor and supervise the commercial banks for prompt release of forex to operators and the business community in a bid to curb hoarding. 

An official of MAN, who did not want his name in print said that it is an abnormal situation for manufacturers to depend on BDCs using the BDC models instead of commercial banks.

 “It is an abnormal situation, it doesn’t happen in any economy, “that is why we see many disruptions in the market and that does not help the economy .” 

On possible round tripping, he said: “That is why I said that there must be supervision and proper monitoring of the commercial banks in this situation, knowing the commercial banks and what they are. 

“So what will happen is that they may use pseudo companies to get that forex and round trip it to BDC operators. And that is why I emphasised a proper monitoring and supervision of the commercial banks, and if that is not done it is just a wasted effort.”

 He disclosed that the stopping of BDC operators from sales of dollars would make them go underground, saying they would still be in operation, but will only depend on insiders in the commercial banks for patronage in releasing dollars to them to sell in the black market. 

“If the commercial banks are not properly monitored, this will happen, because BDCs ought to get their forex from households remittance from Diaspora, from individuals and not from the CBN,” the MAN source said.

On forex squeeze, he said: “I don’t think that the intention of the CBN for bringing back forex to commercial banks is to ease out forex from the market.

“The intention is to make the forex flow, especially for the small scale operators that will need $10,000, $20,000 it will be easier to get it from the banks and they will process your papers and officially send it abroad for whatever you want to buy.” 

Meanwhile, a former Director General, Lagos Chamber of Commerce and Industry( LCCI), Dr Muda Yusuf, said what is happening in the foreign exchange market is a consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex.