CBN's Emefiele Attacks Parallel Market, Says Illegal Businesses Depend On BDC For Forex

The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, has labelled the parallel market as a place where illegal businesses go for dollar exchange. There are three exchange rates in Nigeria; CBN's, Investors & Exporters Window and the Bureau De Change, but Emefiele says only the first two are recognised.

Emefiele stated that the parallel market is a black market were individuals or companies dealing in businesses not recognised by the authorities go to. He said people who do not want to fill necessary documents often prefer the parallel market due to its lack of scrutiny.

How Emefiele Concluded On Illegality Of BDC

The CBN governor made this known at an Investors Conference with the Federal Government of Nigeria organised by CitiBank. While buttressing his point of the illegality of the parallel market, Emefiele said COVID-19 lockdown measures has proved his point as businesses that needed forex have been on lockdown, yet the parallel market is still operational and receiving high demand for forex

"The CBN has always maintained that the black market is not a good determinant of the value of the naira. You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets. But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.”

He used the shutdown of the airlines as an example that supported the CBN's claim, “These airlines are not flying and sometimes you find dollars being sold through the BDC’s into that market just to be seen that we are doing everything possible to moderate the rate,” Emefiele said, adding that, “airlines are not flying, and people are not traveling so there should therefore not be any demand for forex exchange in that market”.

Illegality Made CBN Choose NSFEX For Exchange Rates Unification

While revealing the reason CBN went ahead to choose to unify the exchange rates in line with the rates of the Investors & Exporters window also known as NAFEX, Emefiele said the illegality was a critical factor that informed their choice.

He explained that with legitimate businesses shut down during the two months lockdown and yet BDC was still receiving demand for forex, then the demand has to be from people involved in illegal business, "It could only be those who are dealing in what is simply called corrupt practices that will be dealing in that market and we are not about to talk about unification of our exchange rate around people who are dealing illegally,” Emefiele added.

Emefiele advised people in need of forex to patronise the recognised I&E window.