Speaking, weekend, the bank’s director of financial markets said all bids now hold at once.
The move comes four days after the bank halted dollar sales to retail currency outlets in a bid to conserve its dwindling foreign reserves.
Prior to the latest change, commercial bank were required to pre-fund bids which were submitted to the central bank on a daily basis for the allocation of dollars.
“We don’t sell (dollars) on a daily basis any more. When we do the auction everybody bids,” said the central bank’s financial markets director, Emmanuel Ukeje.
The CBN last Monday relaxed some of its foreign currency controls by lifting its ban on foreign currency cash deposits in commercial banks. Emefiele, who disclosed this, had equally announced that the central bank would discontinue its sale of foreign exchange to BDC operators.
Meanwhile, the CBN has explained its decision to discontinue the sale of foreign exchange to Bureaux de Change (BDCs) even as it advised operators to source their foreign exchange from autonomous sources with a pledge to monitor those sources to ensure that no operator violated anti-money laundering laws.
“We are inclined to empathise with Emefiele who said that prior to this decision, CBN was selling US Dollars at about N197 per dollar to these operators who, in their perceived greed, turned around to sell to ordinary Nigerians, at rates as high as N250 per dollar. To him, this rent-seeking behaviour, led to an increase in the number of operators from a mere 74 in 2005 to 2,786 BDCs today just as the apex bank receives close to 150 new applications for BDC licenses every month,” said the bank’s governor, Mr. Godwin Emefiele.
The Governor further lamented that rather than help to achieve the laudable objectives for which they were licensed, the BDCs have recorded unintended outcomes with interest only in widening margins and profits from the foreign exchange market regardless of prevailing official and interbank rates; potential financing of unauthorised transactions with foreign exchange procured from the CBN; gradual dollarisation of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative as well as prevailing ownership of several BDCs by the same promoters in order to illegally buy foreign currencies multiple times from the CBN.
Emefiele observed that this situation gave rise to a more disturbing financial burden on the nation’s limited foreign exchange profile. He provided a graphic detail of the CBN’s dealings with BDCs to buttress this fact. According to him, the apex bank sells US$60,000 to each BDC per week. This amount translates to US$167 million per week, and about US$8.6 billion per year.
Even with its decision to further curtail this reserve depletion by reducing the amount of weekly sales to US$10,000 per BDC, which translates into US$28.4 million per week and US$1.476 billion per annum, CBN noted with dismay that the financial haemorrhage on the exchange reserves continued especially because the BDCs have become a conduit for illicit trade and financial flows.
