On Wednesday, the 27th of July 2022, the naira appreciated N421.41/$1 as against N421.53/$1 the previous day on the official market. But on the parallel market, the naira traded for N710/$1 as against N670/$1 the previous day, indicating a sharp depreciation of the Nigerian currency.

According to Alhaji Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria(ABCON), panic buying crashed the price of the naira against the dollar. Another BDC operator equally noted that the massive surge in the dollar prices was caused by an intuitive action of individuals who buy and hoard the greenback. 

Bureau De Change is a formal business authorised by CBN to render the services of buying and selling foreign currencies to the public. It is a company that is licensed to carry out small-scale foreign exchange services in Nigeria. Such services include: engaging in forex transactions to eliminate illegal activities in the country, dealing in banknotes and coins, buying and selling personal or business traveller’s cheques and other businesses the CBN may approve from time to time. 

The operations of BDCs are under the strict surveillance of the apex bank to ensure compliance with its regulations. The BDCs FX segment was established to support Nigeria’s economic development agenda and the CBN’s dedication to achieving exchange rate stability in the forex market. But the reverse seems to have been the case of late. 

In July last year, the CBN president, Godwin Emefiele, placed a ban on BDC operations due to fraudulent activities that were taking place like illegal financial flows and money laundering. The ban also caused the suspension of the issuance of new licenses for other BDC operations in the country. The move was implemented to salvage the naira and trim the excesses of BDC operators who exploit, manipulate and artificially inflate the dollar/naira exchange. Thus, the CBN stopped the sales of forex to them. 

In 2021, people speculated that the CBN directive would stir artificial dollar scarcity and mount pressure on the naira. Sadly, that has become the reality. Though banks sell forex at a cheaper exchange rate, people hardly get enough greenback to buy from them. Words on the street have it that they prefer to sell to the BDCs at a higher rate to make more gains compared to selling to individuals. That makes the parallel market the only option for desperate customers. This is why the  BDC operators take advantage of people’s desperate needs for hard currency to inflate prices. 

However, the CBN is working tirelessly to ensure the naira continues to appreciate by introducing monetary policies that could help curb rising prices. Last week, Osita Nwasinobi, one of the CBN directors stated that the bank would continue to make deliberate efforts in the foreign exchange sector to avoid further downward slides in the value of the naira

Currently, the naira is at N616/$1 compared to N710/$1 a week ago. According to a report by  Nairametrics, this happened a few days after security operatives stormed a Bureaux De Change (BDC) hub in Abuja.

Written by Chidera Amakanyadioha

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