Forex Crisis: ABCON Directs BDC Operators To Stop Buying Dollars Above N900

Bureau de Change dealers across Nigeria may be planning a surprise disruption in the foreign exchange market as they have reached an agreement to crash the price of dollars below N1,000, a member of the Association of Bureau de Change Operators (ABCON) who was at the deliberation revealed the development to THE WHISTLER.

The decision by the BDCs is backed by a massive campaign to sanitize the parallel market and eliminate speculations to the barest minimum.

The executives of ABCON decided late last week that BDC operators will stop buying dollars for more than N900 and gave a grace period for members to sell the foreign exchange they purchased at the current rate of N1040, the official told THE WHISTLER.

This would help the naira rebound at the parallel rate from N1,045 to around N900 or N950.

The BDCs believe their decision may convince the new Central Bank Governor, Olayemi Cardoso to resume the sale of forex to the parallel market operators.

The lifeline was cut by former CBN Governor Godwin Emefiele in 2021 after he accused the operators of roundtripping and terrorism financing.

Emefiele also suspended the applications for and issuance of new licenses for BDC operations in the country effective July 29, 2021.

He said, “On Friday, October 13, we agreed in our association and announced that in three days, nobody should buy dollars more than N900. This dollar rise is affecting many products in this country. For the dollar to rise means that goods will rise. The dollar is not our legal tender.

“They told members that anybody who has bought a dollar high should try and sell the dollar because the association wants to crash the price temporarily. This decision cuts across all the BDCs in Abuja, Lagos, Port Harcourt and Kano.

“Dollar is not supposed to trade this high, today, if you want to buy $100 it is N104,000. If an importer buys dollars at a cheap rate, the prices of imported products will also be very cheap.”

Explaining why the decision may not be a permanent solution to the problem, Abdullahi said, the CBN is trying to dictate rates for the BDC operators when it does not sell dollars to them.

In a circular dated August 17, 2023, the CBN directed that the “spread on buying and selling by BDC Operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian Foreign Exchange market window weighted average rate of the previous day.”

Abdullahi Yusuf, Chief Executive Officer of AYA Modo Nigeria Limited at Zone 4 also confirmed the development to THE WHISTLER. He further argued that the speculation could only be tamed if the CBN resumed the sale of forex to operators.

According to him, the apex bank can only dictate a spread between the buying and selling price if they sell the dollar at the official rate to operators.

Yusuf said, “The CBN is partly the solution to the market. There is no way that the CBN will dictate the rate for us to sell our forex the way they want. The market decides how we buy and you can’t tell BDCs to sell at a loss to suit your mandate. No, it doesn’t happen that way.

“If the CBN resumes sale of dollars to BDCs, they have the right to tell us how to sell but now they don’t give, we hustle to get it and then they will say, ‘this dollar that you bought N1040, you must sell it N1,000 can it happen? No. But if you sell dollars to me at a cheap rate, maybe N900 and you ask me not to sell more than N950 or N1,000, we will adhere strictly because they have the right to challenge us.

“All the licenses we have are of no use since they stopped giving BDCs dollars. Before, in a week they gave us $75,000. When different BDCs have cheap dollars from the CBN, the market becomes competitive and operators will be naturally forced to sell low. But so long as I buy it with my money, I can sell it the way I like.

“Even if the CBN likes they should move the Economic and Financial Crimes Commission and DSS operatives to Zone 4, the dollar will still trade far above their target because it is our money and not theirs.”

Another major BDC operator in Zone 4, Abuja who is the CEO of GR Umar International Ltd, Salisu Umar Garu said both the CBN and BDCs have limited control of forex considering the illiquidity crisis in the country.

Garu said, “The issue of forex is something that both the CBN and the BDCs do not have total control over. It is a market. The CBN may be accusing us of speculation but the truth is that if we were the ones, we would not buy dollars at a high rate and even lose our money.

“This is a market. For instance, they (CBN) lifted the forex ban on 43 items and they are willing to give dollars to them to enable their import activities. The CBN may not be able to meet the demands of all of the importers of the 43 items when this happens, the rest will return to the parallel market and the system will be overwhelmed again.”

Garu argued that CBN selling dollars to operators is only a means that would help the apex bank dictate how the BDCs will sell their forex but not the solution to the naira depreciation.