Numbers do lie. Contrary to the saw that numeric values depict the statistical truth of every situation, numbers do lend themselves to the devices of the devious. And there is statistical terrorism inflicted on society by criminal masterminds, like Nigeria’s bureau de change (BDC) operators.
Like pond scum hoarding moss, they have hijacked the workings of the international exchange rates to the detriment of over 200 million Nigerians. Worried by their horrid machinations, the Central Bank of Nigeria (CBN) recently announced that it would no longer sell FX to the BDCs.
Prior to its decision, the bank was selling $20,000 to each of the 5,500 BDCs every week — about $5.7 billion a year. While the BDCs were getting FX from CBN at N393 to $1, they were selling on the streets for N500/$ — instead of the “recommended” N400. The “spread,” that is profit, as they call it, was an incredible N107 to $1.
The anomaly has gifted BDCs with obscene profits as their owners laugh all the way to the bank. The BDC operators made an average of N2.14 million profit every week and about N8.56 million in a month. Each BDC operator earned as much as a bank chief and at times more, which further emboldened them to devise more drastic strategies at crashing the naira against the dollar. Until the CBN said ‘no.’
The apex regulatory bank halted the sale of foreign exchange to the money changers to ease pressure on the nation’s currency, Governor Godwin Emefiele said.
The decision will halt the supply of $5.72 billion annually by the CBN to Nigeria’s bureaus de change – a key source of foreign exchange for Nigerians traveling abroad and local businesses. The central bank will also stop issuing new licenses to currency-trading companies, whose number more than doubled to almost 5,500 over the past five years, Emefiele said at a briefing Tuesday in the capital, Abuja.
The measure may lead to an initial depreciation in the naira’s value as the sudden withdrawal of supply from the central bank causes the price of dollars to increase.
The central bank took the step because some BDC operators have become “greedy” chasing higher profits and their demand for foreign currency is bringing pressure to bear on the naira and the nation’s reserves, Emefiele said. The central bank will only supply dollars through commercial lenders from now on, he said.
“We have noted with disappointment and grave concern that our bureau de change operators have abandoned the original objective of their establishment, which was to serve retail users who need $5,000 or less,” Emefiele said. “Instead, they have become wholesale dealers” who trade in millions of dollars per transaction, he said.
