The Central Bank of Nigeria is ending the mindless sales of foreign currencies to Bureau De Change operators. The reason according to the apex bank is that BDCs have become conduits for illicit flows of money: “We are concerned that BDCs have allowed themselves to be used for graft”. You may wonder if that is a revelation? Yes, every Nigerian knows that BDCs are largely parasitic entities with marginal productivity value if indeed Nigeria is a serious country. What is the productive economic value of getting dollars cheap from a central bank, and then resell to citizens at a premium?
Yet, there is no reason to blame BDCs because Nigeria is very great at scoring own-goals. Nigeria is the only big nation that would pick oil wells, sign documents with connected people, and then watch for those people to move those assets to actual players. Magically, these artificially created intermediaries insert themselves between the commonwealth and actual players, capturing massive financial value for doing largely nothing. You may ask: why can’t Nigeria sign those deals with the actual operators directly?
Nothing is more painful when I read that Nigeria is allocating oil wells to men and women who should not go to sacred places. Ridiculously, that corruption has been institutionalized.
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It is that mindset that created BDCs. Even though the apex bank said it would no longer process applications for BDCs, I can assure you that it would reverse itself in months. Nigeria is designed to score own-goals, shifting the wealth of the commonwealth to select few with contacts. It is a shame!
CBN expects banks to do the job of making foreign currency available and it hopes they play by the rules with high transparency: “We will deal with them ruthlessly and we will report the international bodies.” But do not celebrate, this policy will not move anything because the faith of Naira is not tethered to what they do in commercial banks and CBN headquarters but what happens in warehouses and factories, including old and modern ones.
Nonetheless, I commend CBN for making BDCs history even for a few weeks before they return with another “classification” in the books. Sure, they are not going away because it is through BDCs that politicians win elections. They will not lose that important tool!
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Comment: Prof. Ndubuisi Ekekwe it is interesting to hear this. It’s a positive move with respect to the introduction of our Digital currency(Nigeria’s). My fear is that, 9 months is not enough to put in place the necessary apparatus for a thriving Crypto society except if the project had been in progress before the ban of BTC and announcement of creating Nigeria’s digital currency. There are worries of hijacking, inefficiency of the new exchange platforms, and also the tactics of monopoly.
After banning BTC and abolishing BDCs in the country, it’d be a disaster if the new FX is faulty. It can send us to an economic standstill with overbloated exchange rates. Trust me, if we can have a successful launching of digital FX, it’d save us the trauma of taking one step forward and ending up taking 5 steps backwards.
Hence, it’s strongly adviced that before launching series of beta testings be done, authentication necessary cyber-security apparatus are been put in place and lastly implementing sustainable policies which would give room for various players and not monopoly. There’s no need for rush. The future can only be bright if there’s a source of light.
Comment: This is the step in the right direction, however as Ndubuisi Ekekwe said we should not rejoice yet because in a matter of months BDC might be back to enable political wins.
I have consistently asked why CBN sales foreign currencies to largely supervised intermediary called BDC who does nothing but accumulate wealth without creating value when we have banks.
I agree that the greatest move for valuation of naira currency will come when local industries are enabled to function effectively, however this move by CBN if sustained will bring new sanity to naira. Let’s watch and see how it goes.
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The BDC practices ought to have been from the angle of those who get remittances from overseas, who wish to ‘auction’ their dollars, the BDCs could buy at slightly higher margin, then sell to those who are also in a hurry, at a slightly higher margin.
It’s both perplexing and embarrassing we degenerated to a level where the CBN sells dollars to BDCs, while we have banks in all the states and cities across Nigeria. We just like creating artificial problems in this country, only to get dazed and dizzy, when it’s time to clear a mess we deliberately created. We have banks and fintechs, yet both can’t sell dollars efficiently? We really have lots of decrepit creatures here.
This is not a problem of just politicians, because the people that head CBN weren’t recruited from political parties, they usually come from private sector or global institutions; so it’s all round failure on our side as a people. Most people that win or steal elections know nothing about policymaking, it’s those who are in the system, the eminent domainers, that show them how to dribble the system. At the end, we we largely make dumb people look smart, only to come and shout ‘politicians are our problem’.
As for waking the factories up, I have a policy idea, starting with our shoemaking sector. If we do it, a viable sector will definitely emerge, no chance of failing. Replicate across similar sectors, and get the economy going, without spending billions of dollars.
Francis, i very much like how you articulated your response. truth be told, we have BDCs in some African countries and they handle currency exchange just like you stated. the Banks would focus on those that fall within it’s purview which would and should be the focal point for CBN. If they can drive the economy sector by sector we might be able to move forward.