Forex: BDCs appeal for higher allocation

Bureaux De Change operators in the country have appealed to the Central Bank of Nigeria (CBN) for an increase in the weekly sale of foreign exchange to each operator.

The BDCs also urged the CBN to extend its occasional intervention in the foreign exchange market to their sector to reduce demand pressure at the retail end of the market.

Speaking under the aegis of Association of Bureaux De Change Operators of Nigeria (ABCON), the BDCs lamented that while over 2000 operators have laboured to comply with the N35 million mandatory caution deposits, the $15,000 weekly sale to each BDC by the CBN is inadequate to cover operating costs.

“Considering the difficulties that BDCs are currently facing due to the volume of the weekly sales granted to BDCs as against the associated costs in the business, we are suggesting that the CBN should consider increasing the weekly sales to BDCs from $15,000 to $50,000,” the association said in an appeal letter to the CBN Governor.

Making a case for extension of CBN forex intervention to BDCs, the association said, “given the ever increasing demand of US dollars as against the rigidity of the weekly official sales to BDCs, we have noted that a good number of our members hardly meet up their demands from end-users.

“Now, to assist in achieving the aim of exchange rate stability in the events of increase in demand of dollar and static sales of $15,000 to a BDC, we are suggesting that, for now, the central bank should consider granting our sub-sector periodic sales intervention as it does to banks.

For instance, on September 24, 2014 by Retail Dutch Auction System, the CBN sold a total of N350 million to banks, while on September 29, 2014 and October 8, 2014, totals of N500 million and N400 million respectively were also sold to banks making a sum of $1.250 billion within a period of 13 days. Statistically speaking, the sum of $15,000 is sold to a BDC per week, giving a total of about $37,500,000 to BDCs per week.”

The association also appealed to the apex bank to reduce the mandatory caution deposit to N15 million from N35 million, to free up cash for BDCs to meet day-to-day operations. “After the expiration of the deadline for the payment of the increased caution fee of N35 million, we noticed that a good number of Bureau de Change operators could no longer conveniently carry out their weekly trading due to lack of cash.

Noting that many BDCs are yet to be refunded the earlier mandatory caution deposits of $20,000 and N500,000, imposed before the N35 million introduced in June, ABCON appealed to the CBN Governor to intervene for the prompt release of this fund to the owner BDCs.

Meanwhile, in a bid to calm the recent volatility of the naira, the CBN increased its bi-weekly intervention at the Primary Market this week, as it sold $700 million compared to $400 million sold last week. The CBN sold $350 million on Monday at the marginal rate of 155.75/US$1 while it increased the marginal rate by 1kobo to N155.76/US$1 on Wednesday when it sold another $350 million.

At the interbank on Monday, the naira appreciated 85kobo to close N163.85/US1  following the CBN’s RDAS auction and an undisclosed amount of dollars sales by the NNPC.

However, the FX market witnessed renewed pressure on Tuesday as the naira weakened by a marginal 30kobo to N164.15/US$1.

Despite the dollar sales by Shell on Wednesday, the naira sustained pressure, depreciating 45kobo to close N164.60/US$1. On Thursday, the naira breached the N165.00/US$1 mark to close at its weakest position in eight months (N165.30/US$1).

Source : SunOnline

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