INTERVIEW: CBN Directive On Old Dollar Denominations Will Boost Forex Liquidity- Gwadabe

In this interview with Ukpe Phillip, the National President of the Association of Bureau De Change Operators, Aminu Gwadabe, spoke on the recent directive by the Central Bank of Nigeria to Deposit Money Banks and licensed bureau de change Operators to accept all lower US Dollar denomination and old series of the currency.


EXCERPTS…

The Central Bank of Nigeria in a recent circular directed BDCs and banks to collect lower dollar denominations from customers with a threat to sanction operators and Banks who flaunt the order, how will this reshape market perception about the dollar notes in question?

You know first it will address the issue of making those currencies not to be legal tenders, because the banks are rejecting it over the counter. So, when our clients come and we sell it to them, they go to the bank to deposit, the banks will reject it.

That is the reason why when a customer brings it to us, since we know that our client when they take it to the banks that they will reject it, we too we will now have to be cautious of accepting it, because now, we will give it to you and it is returned because the banks are not accepting it.

So, those currencies we don’t have people that buy them except you see the person that is travelling immediately. But somebody that is not going now will not buy it from you most especially if they want to put it in their domiciliary account and use it instead of carrying it cash. So, but now the CBN has issued a circular to sanction any operator that rejects to collect and this is a very commendable step taken by the Central Bank of Nigeria because ab initio, it is like those notes were not legal tender in the country. So that is the honest perception about those currency notes.

How will the directive improve forex liquidity in the country amidst dollar crunch?

If it is not acceptable how can it circulate? But with this new measure, it will add to the circulation of the ones available and that will mean more liquidity and confidence in the tender. Once there is confidence, people can collect it and do their transactions with it unlike before where there were even price differentials between the lower denominations and the older notes and the new notes.

You see people buy them differently because if you buy the old notes, nobody will come and buy them from you. It will be very rare to find people that will buy it from you. But now we can begin to witness more frequency and the velocity of the circulation will increase. This will mean changing hands and in changing hands, from one person to another, it is also adding to dollar liquidity which will also help in stabilising the exchange rate.

So, that is what I think it will help to achieve. Because formerly these notes have been there and people are not buying it because of these condition, but now people will bring them out, because they know the market can now accommodate it and the banks can receive it unlike before. It is a good one, because it will induce liquidity and rate stability in the market.

Will it further eliminate the price differential between older dollar series and lower dollar denominations?

“I don’t see the price difference lingering. It is not that the price difference is so much we are talking of a minimal difference you know, so I don’t see it lingering.
If I buy and I sell it to you and you collect then, why must I be talking of price differentia? Once the banks can collect it, the differential will not last long at all. It will normalise. The only fear is lack of collecting it and now that fear will not be there, so why do we have to give another value for the same? Members of the public should resist when such offers are given to them. They should refuse honestly.

On the part of ABCON, what have you done to communicate the development to members for a seamless flow of the CBN directly?

“Definitely we have informed all our members about the circular, because if you look at it, they said banks and BDCs. We have about six forums in all the zones where all our members belong. It is a WhatsApp forum where we send information and messages to all the members. We have circulated it to all our members that this is the new directive and that they should also let their clients know that any bank they go to and the bank refuses to collect those dollar, they should come back and inform us, so that we will report to the CBN. Because, the CBN also contacted us and they informed us of this circular. So, they said if we have such issues, we should not hesitate to report it immediately to the Central Bank so that they can take action.

Apart from the CBN threat to sanction defaulters, will ABCON sanction any of its members that default on the CBN directive?

“Definitely, because this is already an obligation and we have to report any BDC that fails to comply. Ab initio like I told you, we buy and we only buy it at a different rate because it is not all our customer that will come and accept it until you see someone that doesn’t care about the difference. Most people will go to banks and they will not collect it. We are not deposit takers, but we buy and when we sell to our clients and clients come back with it and say they took it to the bank and the bank did not accept it as deposits, so it becomes a problem.

“But all the same, if there is any of our members that refuse to buy, of course they will be sanctioned because, it is an obligation for him to collect, so if they fail, it is a breach of the CBN directive and we will frown at anybody breaching the directive.

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