Market Dominance Versus Regulatory Compliance: Nigeria’s Exchange Bureaus
By Emeka Uzoatu
When Bureaux de Change came on board in Nigeria as part of the government of the day’s adjustment of structures policy in 1989, they were seen as a welcome relief. Back then, people mostly used them to sell and source foreign exchange independent of the Central Bank of Nigeria (CBN). A kind of organized parallel market, small players generally preferred them to the unlicensed touts that hawked foreign currencies hitherto.
Long before then, though, our nation had come a long way in foreign exchange transactions. O yes! For long before the territory was purportedly discovered, amalgamated and renamed by outright invaders, all the peoples living therein had been trading with their neighbours.
Till came the age of colonisation and a permutation of its attributes upturned the applecart. Consequently, these benevolent torturers were to take over and run our affairs till the dawn of independence. But even then, they still controlled us via the unseen strings of neocolonialism; ensuring, thereby, that we never came of our own. And, up till date, we hardly have.
What with how the currency of our supposedly independent state has been exchanging with theirs over the years. But for a brief period in the 20th Century when oil yet spelt a boom, the case has been comparable to that of a king and a knave in a game of chess.
With no blame-apportioning intents, suffice it to note that it has proved an insurmountable albatross. To date all efforts targeted at having an equitable foreign exchange system have arguably remained as impervious and unbending as the rates have proven tenuous and pliable.
The current debacle is better understood if we backtrack to the 2nd Republic when the naira reigned supreme. That time around had seen the introduction of the import license regime. Just the mere brandishment of the card of the political party ruling the nation then and you had enough FX to paint London, New York and Paris green and white in one stroke.
A development so rampant that Nobel Laureate Wole Soyinka celebrated it in a song in his iconic Unlimited Liability Company vinyl album.
A Curse for a Cure.
Like a fast forward to Gen Babangida’s Structural Adjustment Programme (SAP) – when indeed the BDCs made their entrance – exposed. That era saw the naira trumped to a mere piece of paper. To imagine that it had then only fallen from exchanging at about seventy kobo to four naira to a dollar does shiver more than a timbre now!
Well, following the continuation of the Wholesale Dutch Auction System (WDAS) that wrought the magic, the slide has never abated. So much that with time the famed battle to ‘ensure monetary stability’ entered our economic lexicon. Its companion of ‘restoring the confidence of investors in the system’ was soon to join the ever-lengthening queue.
Like it ought to be, all legitimate FX demands from the apex bank were obtainable only from commercial banks. Be they commercial invoices; school or medical fees; personal or basic travel allowances and their like. Ideally, this made for better and easier monitoring. But somehow from being brides, the BDCs morphed into daughters and almost eclipsed the banks.
Any wonder the exponential increase in their number over the years. From a mere seventy-four at the turn of the century, the country now boasts more than five thousand of them presently. And that is discounting the mountainous pile of applications for them pending at the apex bank.
Meanwhile, the upward spiral of the naira/dollar exchange rate continues. So much that by 2015 under the ‘clueless’ regime of the time, it had fallen to about 190 naira only to a dollar. In fact, it was one of the integers that subsequently propelled a new party to power.
But upon the presidential candidate of the new party in power now promising to make the two currencies sell at a par, it came to no avail. In fact, we were belaboured with a Benjamin exchanging at well above 500 naira only before the hammer fall.
This is the more reason why this most recent move by the CBN banning the sale of foreign exchange to BDCs should be a welcome relief. As acknowledged by the president of the Association of BDC Operators of Nigeria (ABCON), now is the time for them to resume their normal operations. Rather than encroaching on the territory of the banks, they should now come on their own naturally.
However, the CBN should also use the opportunity to tighten their control girdles on them. This is to avoid possible sabotage. O yes, ‘regulatory compliance’ should never be sacrificed at the altar of ‘market dominance’. All the more so as by April this year the BDCs celebrated the achievement of one trillion naira annual market turnover. Implying that, however you look at it, they remain a prime mover in the nation’s economy.