The Central Bank of Nigeria (CBN) has announced it will no longer facilitate the sale of forex to Bureaux de Change (BDC) in a bid to alleviate the pressures weighing on its foreign reserves. Nigeria’s reserves late last year slipped below the $29bn mark after a year spent oscillating between $28bn and $36bn, and these new regulations come in response to a rise in internal demand for dollars.

Nigeria’s reserves late last year slipped below the $29bn mark

The bank’s governor, Godwin Emefiele, outlined the amendments in January and said BDCs from hereon in were to source forex from the autonomous market. “Despite the fact that Nigeria is the only country in the world where the central bank sells dollars directly to BDCs, operators in this segment have not reciprocated the bank’s gesture to help maintain stability in the market”, he said. “Whereas the bank has continued to sell dollars at about NGN197 per dollar to these operators, they have in turned become greedy in their sales to ordinary Nigerians, with selling rates as high as NGN250 per dollar.”

This rent-seeking behaviour, according to Emefiele, has resulted in a rise in the number of operators, from 74 in 2005 to almost 2,800 today. Many, he added, are in the business of widening margins and profits from the forex market, which he described as a “a huge haemorrhage on our scarce foreign exchange reserves”. On top of that, Emefiele expressed concerns BDCs have “become a conduit for illicit trade and financial flows”.

The change in policy is in no way intended as punishment for BDCs, and should be seen instead as a method of safeguarding and preserving the nation’s commonwealth.