central bank is encouraged To cut BDCs by 95%
Tope Fasua, the economic adviser to the Nigerian president, has advised the Central Bank of Nigeria (CBN) to cut the nation’s bureau de change (BDC) operators from over 5,000 to only 200.
Leading economist Fasua, the CEO of Global Analytics Consulting, made the recommendation at an economic policy conference with the Abuja Chamber of Commerce and Industry. The conference’s theme was “Unification of foreign exchange and the effect of fuel subsidy removal on the business community.”
He claimed that the CBN finds it challenging to oversee the large number of BDCs, which results in inconsistencies in the foreign exchange market.
We must implement some structural changes. For instance, I think we should strengthen and restructure the BDC industry. It is not natural to manage over 5,000 BDCs selling cash on the streets, said Fasua.
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The BDC industry and banks should be given incentives by the CBN to distribute forex to Nigerians more promptly, he continued.
“If we can implement structural reforms in the banking industry and in the banks and effectively oversee them, the CBN with the reserves that we have can incentivize that sector, allowing people to access capital much more quickly,” Fasua added.
In order to achieve stability on the official market, he also urged for the definition of the black market for foreign exchange.
We can achieve stability once you define the unlawful market, according to Fasua.
In order to support his arguments, the presidential adviser remarked, “We cannot manage 5,000 BDCs, perhaps we should be looking at 100 or 200.” At the time of my latest check, there were 145 BDCs in the United Kingdom, which is a popular tourist destination. They have 130 in the UAE.
So, what are we planning to do with 5,000 BDCs? You won’t ever be able to keep an eye on them. How many employees would be required to examine and verify their returns? To be able to meet people’s requirements, you therefore need both banks and substantial, established BDCs. The government can then use incentives to encourage that market.
Nigeria is now dealing with a foreign exchange crisis, which is why Fasua’s call comes at this time. Businesses are finding it difficult to get foreign currency due to the significant depreciation of the naira against the US dollar in recent months.
In order to handle the forex problem, the CBN has taken a variety of steps, including limiting the supply of foreign exchange to BDCs. These actions haven’t been very successful, though, so far.
Whether the CBN would heed Fasua’s request to lower the number of BDCs is an open question. However, his suggestion is something to take into account as it might help to increase the currency market’s effectiveness and openness.
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