Home Latest Insights | News The Naira Problem Is Not Distribution-Related But Structural, Making Banning Binance, Restricting BDCs, etc Impotent

The Naira Problem Is Not Distribution-Related But Structural, Making Banning Binance, Restricting BDCs, etc Impotent

The Naira Problem Is Not Distribution-Related But Structural, Making Banning Binance, Restricting BDCs, etc Impotent

Nigeria remembers Bureau De Change (BDC) operators again: ‘“BDCs may sell foreign currency up to the equivalent of USD10,000 to a customer for school fee once a year. Such fee, which shall be transferred from the BDC’s domiciliary account with a Nigerian bank, shall be paid directly to the school,” the proposed Central Bank of Nigeria (CBN) guideline said. Similarly, the guideline highlighted the imposition of a limit of $5,000 per annum for foreign currency transactions for medical bills abroad.’

Good People, I am not aware of any decent university in the United States which charges $10k per year. In the one I attended, they go for $67,000 yearly. And if you go for Harvard MBA, you could be looking at $75, 000 per year. (These fees are for tuition only.) So, if that is the case, does this policy hold water? Sure – the central bank has to initiate an action.

Things have changed. When I began in FUTO,  the Center of Erosion Studies in the university was manned by Germans, and we had a fair decent number of foreign students. In the Physics department, there were many Cameroonians. But over a series of strikes, the Indians, Nigeriens, Cameroonians, etc all left.

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Today, here we are…very unfortunate. Yet, I do not think BDCs are the root cause of this FX paralysis. The root cause is that Nigeria is floating Naira which is a bad policy. We can ban Binance,  restrict BDCs, etc but until we can earn US dollars, the Naira will continue to struggle. The problem we’re having is not distribution-related, but structural, and that means if we close all distribution channels, and refuse to reduce DEMAND (foreign schools, hospitals, toothpicks, etc), the core drivers of the paralysis, the Naira will continue to fade.

Considering everything happening, I propose for Nigeria to remove floating but change FX forward-credit into one which focuses on production-oriented things. For example, instead of giving a company $1m at the official rate to import an equipment,  you ask that company to source funds via, wherever, and when it is imported and confirmed at the Customs, the Central Bank of Nigeria will refund that company the money and debit the Naira. The focus here is to make sure only production-focused imports are supported.

Comment on Feed

Comment 1: School fees and medicals can still be processed through the commercial banks.
Having bdc’s trading in unquantifiable amounts of foreign exchange daily without anyone knowing who is demanding or supplying or what the purpose or source of supply is coming from. Can create a very big distortion in a market that has been liberalized & its also dangerous to the economy.

Lastly, I agree the problem is not only regulating the bdc’s. We have to improve on our productivity e.g export has a nation but creating transparency in the bdc sector is very paramount. Ndubuisi Ekekwe

My Response: Your point noted. Sure – I did not even know that BDCs can help people pay school fees from Nigeria. It seems they have evolved. Typically you expect people to pay via their banks. I wish CBN good luck on this

CBN’s proposed guidelines limit BDCs dollar outflow for Education and Medical Expenses to $10k and $5k annually


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