Business - Economy
Updated: August 10, 2020

Sanusi Wants CBN To Fund Bureaux De Change To Save Naira

By Olalekan Fakoyejo
August 10, 2020
0

The Central Bank of Nigeria (CBN) has been urged to provide forex for the bureaux de change (BDCs) in order to reduce the pressure on the naira. The suggestion was made by the former CBN governor, Lamido Sanusi. He said CBN backing the bureaux de change will strengthen the naira.

Sanusi made the comment during a webinar tagged, ‘United States of Naira: What Price for Unification’ which was organized by a cross-border payment platform and forex trading firm, AZA. During the webinar, he said the lack of funding the bureaux de change caused the gap between the BDC and Nigerian Autonomous Foreign Exchange (NAFEX) rate.

“I think what the bank is trying to do is bridge that gap and I think moves have been made in general in July that has brought the CBN rate and the NAFEX rates closer. But, the BDC rates remain an outlier,” he said, adding that, “It is a small percentage of the market, but it does have an impact on speculation, which is why it is important to fund that market.

“And once the Central Bank has enough money and funds that market, it will probably converge. So, I would not be interested in moving the rates towards N470, for example, but I would like to see a convergence of CBN and NAFEX, which will take care of over 90 percent of the transactions in the market and there is some small funding for BDC rate to bring it back to that level.

“It is what the IMF and the World Bank have asked for. It makes for positive transparency; it makes for clarity of direction; it also reduces the speculative demand for naira. For me, this is the Central Bank finally saying, basically, we will do what the market has been asking for.” AllNews recalls that the CBN had recently devalued the naira to N381 to a dollar, from the N360.

CBN Governor Shouldn't Be In Haste

Sanusi also advised the CBN from making hasty decisions regarding the devaluation of Naira since no one knows exactly what will happen tomorrow or the next day as the financial industry has been hit by various shocks from Russia and Saudi Arabia oil price war and the COVID-19 pandemic.

He said it's advisable for the CBN to wait for the wind to settle before rushing to make currency decisions, “There are lots of the shocks the bank has no control over. It would be a brave governor of the bank who would announce a target rate when he does not know how much is going to come in or what is going to happen to the oil price tomorrow or the day after, and the entire world is going through shocks.

“I think it is extremely important that we recognize that the only clarity that the Central Bank can give at the moment is to say we do plan to converge, and that means the official rate is going to be devalued, but we are not going to do it in a rapid and disorderly manner.

“But, if they want to preserve the value of their currency, there is some virtue in waiting for an orderly unwinding of these backlogs because we must remember that when Covid-19 hit and after the Russia-Saudi fiasco, oil prices went down to $10 a barrel,” Sanusi said.

CBN Against Bureaux De Change

While Sanusi wants the CBN to financially support the BDC operators, the CBN had said it can't consider the Bureaux De Change in its naira rate unification as the BDC market is patronized by illegal businesses. The CBN intends to unify the naira rates in line with the CBN and NAFEX rates.

The CBN labeled the parallel market as a place where illegal businesses go for dollar exchange. There are three exchange rates in Nigeria; CBN, Investors & Exporters Window (NAFEX), and the Bureau De Change, but Emefiele says only the first two are recognized.

Emefiele stated that the parallel market is a black market were individuals or companies dealing in businesses not recognized 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, he said in an AllNews report.