ABCON rejects CBN’s mandatory forex bidding, insists on rate review
by Hope Moses-Ashike
May 27, 2018 | 7:21 pm| | | Start Conversation
The Association of Bureaux De Change Operators of Nigeria (ABCON) yesterday rejected Central Bank of Nigeria’s (CBN’s) directive mandating Bureaux De Change (BDCs) to make three forex biddings and purchases on weekly basis. The group also insists that the regulator review BDC’s dollar purchase rate to align with rate commercial banks’ buying rate.
ABCON President, Aminu Gwadabe, said in a statement that CBN’s directive mandating BDCs to make such purchases is not in line with global best practices and should be put on hold. He said: “The CBN’s directive at this time of our operational difficulties is no doubt precarious and vague and was intended to emasculate a sector that has helped the system to stabilize and thus unacceptable”.
The ABCON’s position followed yesterday’s directive by the apex bank that BDC buy dollars at least thrice weekly to deepen market liquidity. The CBN had directed that: “All BDCs shall henceforth access forex from the CBN on Mondays, Wednesdays and Fridays. It is compulsory that all BDCs access forex at least three times weekly. Any BDC that fails to access the forex window at least three times weekly shall have its licence reviewed by the CBN”.
The CBN’s goal is to ensure that eligible travelers are able to access foreign exchange for the Business Travel Allowances (BTA), Personal Travel Allowances (PTA), school fees payment and medical bills payment. It is also in line with its plan to deepen foreign exchange liquidity available in the market.
Gwadabe said the regulator should firstly merge BDC dollar buying rate with that of commercial banks and also pay ABCON disbursement fees as it is practiced globally. For instance, Travelex also collects forex disbursement fees from the CBN.
The ABCON leader urged BDC operators to remain calm and focused, ahead of and executive engagements with the CBN and further communication soon.
Gwadabe has therefore recommended that the CBN cuts the three market days for buying dollars to two at $30,000 per market day. He said: “The rate between the banks and DBCs should be merged for uniformity and fairness. A situation where the banks buy dollar from the CBN at lower rate than the BDCs is no helping the market stability drive. Besides, ABCON should be considered for disbursement fees like Travelex in the collection centres to ameliorate the new assignments”.
Operators insist that making Fridays as market days and funding same day will be difficult to achieve and therefore should be discouraged.
Gwadabe assured the CBN of ABCON and BDC’s continuous support in enabling the regulator achieve its core mandate of ensuring exchange rate stability and liquidity access.
Gwadabe also added that: “The BDC sector is confronted with many challenges such as multiple exchange rate, abnormal bank charges, Value Added Tax (VAT) and Commission on Turnover (COT), parallel market operators and illegal International Money Transfer Operators (IMTOs), porous international boarders, complex documentation requirements and poor capacity/ skills of operators”.
Continuing, he said: “For instance, the increasing difficulties arising from over regulation and complex documentation requirements that licensed BDC operators are facing in carrying out their daily legitimate operation remain worrisome. These hitches have negative impact on BDCs’ efforts toward compliance to statutory and regulatory requirements. For instance, six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring, saying this constitutes multiple regulation of a unit of the financial sub-sector that is only involved as a small market player”.
He said a BDC operator is expected to render daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator.
“ABCON is therefore using this opportunity to appeal to the CBN to take urgent steps to review the rate at which the dollar is sold to BDCs in order to boost ongoing recovery of the naira against dollar. Obviously, the BDC business has been badly affected by “uncompetitive rate as the CBN sells dollars to BDCs at higher rate compared to what it sells to commercial banks, yet both institutions target the same market segment and customers. The BDCs buy dollar from the International Money Transfer Operators (IMTOs) at N360/$1 and sell to end users at N361.5/$1 while the CBN sells to commercial banks at N357/$1 and the banks sell to end users at N360/$1,” he said. He urged the CBN to review BDC rate to align with that of the banks since both sectors serve the same customers.
The ABCON boss also want the apex bank to make BDC transactions Value Added Tax (VAT) and Commission on Turnover (COT) exempt and reduce BDCs licence renewal payments.
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