Bureau De Change Operators Were ‘Bad Samaritans’ Too – John Izuka

The Managing Director of the International Monetary Fund (IMF), Ms. Christine Lagarde, on Wednesday, January 6, 2016, met with the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, as well as Chief Executive Officers of the Deposit Money Banks (DMBs) in the country.

John Izuka, (LinkMoment).

Mrs. Chrisitine Largade, rightly or wrongly seen as a Bad Samaritan by many, is the International Monetary Fund (IMF) Chief (Bad Samaritans – apologies to Cambridge Professor Ha–Joon Chang). Her recent visit to Nigeria was not what many presented it to be. It was not a solidarity visit but a fact-finding mission; an audit. She came to assess how bad the situation is or has become, with the price of our oil more likely to settle around $20/barrel.

IMF’s major role is to ensure that member countries are able to sustainably make payments for goods and services and also offset maturing obligations. When bankers talk about maturing obligations, they basically refer to interest payable on borrowings and other commitments.

One of her recommendations made public to Nigeria was that flexibility should be returned to the Nigerian Foreign Exchange (FX) space. Well, here we are, one or two weeks after, the outcome is that Central Bank of Nigeria (CBN) Dollar cash sales to the Bureau De Change (BDC) operators have been stopped and you can now deposit FX cash and wire same through the regular banks. Perhaps what many do not know yet is that Travelex is coming! They will take up the function the BDCs used to perform. The functions they abused terribly.

Travelex is an international BDC and payment facilitator. They will be allowed to import their own Dollar cash and sell foreign currencies in line with CBN approvals. They will do proper documentations too and they may also sell Traveller’s Cheques. The benefits are immense for Nigerians when you consider that Travelex’s prices are usually controlled and they are not allowed to wire millions of United States Dollar (US$) out of this country like the BDCs do or used to.

BDCs were a problem to this country and all, I mean all that agreed that CBN should be selling dollar cash to them should be tried for corruption too. Did you know that the CBN was selling US$8.6 billion of our foreign reserves dollars to these guys yearly? The US$8.6 billion will be frittered into offshore accounts and billions used as bribe funds and used to pay for undocumented trade transactions. Crazy!

At the height of the BDC madness and as at 2013, the CBN was selling US$250,000 to each registered BDC operator in this country US$250,000 and there are 2,786 of them registered with the CBN. What it means is that while you struggled to earn NGN18,000 minimum wage per month, some BDC guy who receives US$1,000,000 per month walks away with at least NGN2,000,000 profit and that is assuming he sells ONLY what he bought from the CBN and does nothing else! You now know where your FX reserves was been drained from.

Well, CBN has finally repackaged the FX restrictions as supported by Madam Chrisitine Lagarde and now you source your dollars from wherever and can make transfers too. Great stuff. The only issue is that some smart alecks have already moved millions of their FX across the borders in a flight to safety. No one knows whether these funds will come back intact.

Emefiele’s CBN must continue to protect our foreign reserves which stand at US$28 billion today. US$28 billion is nothing when you consider that this country’s schools fees bill stands at over US$2 billion/year and import bill is a bit over US$4.5 billion (over NGN900 billion)/month! The implication is that is if we run at the current rate of dollar demand, in about 7 months, the FX reserves will be zero. God forbid! At least, our FX reserves are safe from the machinations of BDC operators.

However, if you are speculating on FX, my advise is ‘sell’. The rates will crash to below NGN230 per 1$ shortly.

My friends, those who sold over US$50 billion of our FX to and through BDCs are the real Bad Samaritans. They live among us. They are now saints.


By John Izuka.

John Izuka Writes About FX
Mr. John Izuka is a banker and writes from Abuja