In January 2016, the Central Bank of Nigeria (CBN) announced that it was restricting Bureau De Change (BDC) operators from accessing foreign exchange in order to reduce the pressure on Nigeria’s foreign reserves. The ban was reviewed through a circular issued by the CBN in July; the circular was titled, “Sales of foreign currency proceeds of international money transfers to ‘BDC’ operators.”

The circular stated that “in the continued effort to ensure exchange rate stability and encourage participation of all critical stakeholders in the forex market, authorised forex dealers are hereby directed to sell foreign currency accruing from inward money remittances to licensed BDCs with immediate effect.”

The issuance of this circular was expected to bring a sense of relief to the BDCs and Nigerians due to the increasing gap between the interbank rates and the parallel market which as at July 22 when the circular was issued, the parallel rate was N344/$. However, the naira has experienced a steep decline to 475 as at October 5, 2016.

Despite the CBN’s instruction to authorised dealers to sell foreign currency to the BDC operators, the BDCs have however complained of their inability to access foreign currencies from these dealers. Speculators have also played a role in the fall of the naira by buying foreign currencies with the expectation of a continuous fall in the value of the naira. The inaccessibility of forex has led to an increased pressure on the forex available to the BDCs creating the continuous fall of the naira in the parallel market.

On Monday, the naira experienced a rise in its value to N470/$ as Travelex, an international foreign exchange dealer began its sales of the dollar to the BDC operators. Travelex is expected to issue $15,000 to Nigeria’s 3000 BDCs leading to an improvement over the initially approved $10,000 weekly. With the new development, a total of $45 million would be disbursed weekly amounting to $2.34 billion yearly.

One company expected to supply $2.34 billion per year?!

The increased dollar inflow has occurred through disbursements from the country’s diaspora remittances. The inward diaspora remittance in 2015 was $21 billion and it’s expected to increase to $35 billion this year.

In August, the Central Bank banned Nigerians from using unlicensed international money transfer operators to receive remittances, reducing the IMTOs to 3 – MoneyGram, Western Union, and Ria Money. The ban of these unlicensed IMTOs was because these operators were not remitting the foreign currencies received from Nigerians abroad, but only transferring the naira equivalent making foreign currencies remitted into the country inaccessible to BDCs and increasing the pressure of forex in the country. This figure has been increased to 14 because of the 11 new licensed IMTOs by the CBN with conditions making the inwards remittances to be more assessable by BDCs.

Before this new development, Travelex was popularly known in Nigeria for their payment of traveller’s cheques. Travelers who need foreign currencies apply to Nigerian Banks for the amount they need. The Bank approves the amount and issues travellers’ cheques to travellers who are then issued foreign currencies by travel agencies like Travelex.

The introduction of Travelex has created a medium of transferring the foreign currency directly and faster. The President, Association of Bureau De Change Operators of Nigeria, said Travelex has the technology to sell forex to about 1,000 BDCs in a couple of hours. The BDC operators are expected to undertake a biometric data capturing exercise with CBN to enable them to access the international money transfer operators (IMTOs)/Travelex dollars window.

Last week, it was reported that Travelex was selling dollar directly to travellers at $356. The international forex dealer stated stringent conditions to assess the foreign currency. The requirements include the presentation of valid international passport, visa to the destination, Biometric Verification Number, BVN, card, airline boarding pass and signed copy of the transaction. Another stringent condition by the firm was that cash would only be handed over to the traveller at the boarding gate after security and immigration checks.

With this new development, it’s expected that the naira will rise and that the gap between the interbank rate and the parallel market would continue to reduce. The arrival of Travelex has also introduced a new sense of fear in the mind of speculators and Nigerians who have kept their dollar hoping for a continuous fall of the naira.

The introduction of Travelex is said to be a good development for the country but the underlying issue is that would the rise of the naira be sustainable? Can the country be said to have solved it foreign exchange problem if it’s not truly creating ways to increase the inflow of foreign currency into the country? Investing in the real sector which is the interest of Nigerians would  increase exports for the country and subsequently increase the inflow of the foreign exchange in the country.

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