This decision has its own risk considering that we have been here before. Operators inform Nairametrics that at the policy was in place for banks to sell forex directly to BDC operators, staffs of Treasury department of most commercial banks use this as an opportunity to make “fast bucks”. An operator explained to Nairametrics that rather than sell dollars at the prescribed official rate (before floating), Treasury staffs will sell to BDC operators at an extra premium and then pocket the difference.
For example, if the approved rate was N200 they will sell to BDCs at N220. BDC who were not willing to play ball will be informed that there are no dollars to sell. The willing BDC who agree to play will now have to issue two cheques, one at the rate of N200 and the other N20. The former will be in the Bank’s name whilst the latter will be in the name of a personal account produced by the Treasury Staff.
Whilst this practice worked perfectly well when the exchange rate was pegged we inquired if it could work now that the currency is floating. The operator informed Nairametrics that it was still possible because of the currency disparity between the interbank market and parallel market creating an incentive for arbitrage. The “Treasury guys are just too powerful and can still decide who they want to sell to” we were informed.
Whilst this latest move by the CBN may help reduce the scarcity of dollars in the retail end of the market, the fact that the rate disparity still exist remains a big problem. Another issue pointed out is the 41 banned items. With this ban still in place, it is believed that pressure will still be placed in the black market as hardline importers will still rely on that market to fund their transactions. Whilst this holds true, Nairametrics believe the impact is not as huge as suggested. The current depreciation at the black market we believe is mostly due to parents scrambling to get forex for their summer holiday.
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