Economy
CBN-BDC Scuffle: After CBN Ban, BDCs Move to P2P Forex as an Alternative Source of Forex
Over a month has passed since the Central Bank of Nigeria (CBN) stopped selling forex to Bureau De Change (BDC), leaving many wondering how these parallel market operators will continue to operate in the face of the new CBN policy.
BDC operators play an important role in Nigeria’s economy as informal financiers. This creates a strong foundation for cooperation with apex banking. The apex bank was unable to control the BDCs due to greed and the pursuit of abnormal profits. Godwin Emefiele (the Governor of CBN), ended the relationship as he addressed the media during the MPC briefing, Tuesday 27th July 2021.
He stated that in particular, they have noticed with disappointment and great concern that BDC operators had abandoned their original objective for the establishment, which was serving retail end-users who have $5,000 or less. He claimed that they have turned into wholesale dealers in illegal foreign currency, averaging millions of dollars per transaction.
Despite the fact Nigeria being the only country where a central bank sells dollars directly at the BDCs today, operators in the Nigeria BDC market have not reciprocated that gesture to maintain price stability in that segment.
This approach has hurt top Forex brokers in Nigeria multiple times, many of them even abandoning the local market and switching to international instead. Although reports have suggested that the governor may appeal to the apex bank for assistance, his resolve seems unshaken.
There are ongoing investigations on how these developments have affected the operation of BDCs. An operator of a BDC stated anonymously that BDCs can make money other than the CBN sale. He stated that BDCs were not closing down shops.
He explained that funds inflow refers to money that comes from outside Nigeria, mainly from the UK and other European countries and they can receive a large amount of money due to the account BDCs use.
They normally assist customers in accepting these inflows from overseas and facilitate outflows to countries such as China. There are limitations on how much money one can deposit or send to their domiciliary accounts.
“However, BDC operators have relationships with parties around the world that can facilitate smooth and seamless payment.” He said that there was no way for him to source foreign currency in Nigeria right now.
Abbas, another BDC operator, stated that it is important to be creative in dealing with difficult situations in Nigerian businesses and BDCs are no exception.
He joked that those who cannot keep up with the pace of business would need to shut down. Nigeria is only for the strong players, he says. BDC operators that cannot overcome challenges will have to close their doors.
“It’s not easy to get dollars but for the moment, most of my colleagues and I have discovered that dealing directly with customers has proven more profitable than dealing with licensees.”
He said that he only uses customers with proper documentation like passports and travel documents to get the maximum amount of personal or business travel allowances (PTAs) from banks. Because of the large number of people who are interested in travelling out of the country, this is a significant source of forex supply for BDC operators.
This avenue has been very profitable as it has allowed them to purchase dollars at a lower price and then sell them at black-market rates, while still making significant profits. While this method is not sustainable, he believes that there will be more creative channels soon.
Ango, a BDC operator, also confirmed that BDC operators work in partnership with individuals to obtain FX from banks.
“If someone wishes to take a personal travel allowance, they will need to show us their documentation. We would then fund his account to receive the maximum amount from the bank. Everyone gets a cut so the transaction runs smoothly. The licenses are ineffective at the moment because the CBN has stopped giving us dollars,” he said.
BDC operators are now more dependent on peer-to-peer transactions to fund their dollar supplies in the face of the CBN dollar sales ban. People with strong networks of buyers or sellers attract more business, while those who don’t have such strong networks are less likely to be successful in attracting volume.
However, exchange rates continue to be transacted at black market rates that are higher than those preferred by the central banks.
BDCs’ reactions to the ban by the apex bank raise questions about the effectiveness of Nigerian monetary policy. Can they sideline a major player in the foreign currency space and directly deal with banks? In this case, the end should justify the means. However, there have been very few results as the naira is still extremely weak against the dollar.
The rate at the parallel market was N530 per dollar at the time this article was written. This indicates that black-market forex is still in high demand.
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
By Adedapo Adesanya
The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.
At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.
It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.
Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.
Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.
Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.
“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.
Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.
If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.
Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.
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