Sugarhugs:



Please I don't understand, summarize?

In summary, wear more of the beads (your dp) and native wears more often. Patronize Made in Naija clothes.

davide470:
The ones they were selling at official rate caused the spread at the moment, so why continue?

They should have sold it at the real rate or by auction, but not at the official rate. But if they are not willing to do that, then it's best to end it.

Seun:
They should have sold it at the real rate or by auction, but not at the official rate. But if they are not willing to do that, then it's best to end it.

Well, they would sell to the banks tomorrow. Normalcy is being introduced

http://nairametrics.com/cbn-to-sell-dollars-to-banks-on-thursday/

Great piece.

davide470:
Well, they would sell to the banks tomorrow. Normalcy is being introduced

http://nairametrics.com/cbn-to-sell-dollars-to-banks-on-thursday/

If they are still maintaining the so called official rate instead of selling the forex by auction, the result will be exactly the same as with the BDCs.

According to the CBN, it sells about US$1.5 billion/year to
BDCs in the country at N197.0/dollar. The BDCs however sell
to the average Nigerian on the street for as high as N260/
N270/dollar. It means on the average, each BDC was making
about N73.0 on each dollar bought.

Hmm.. Good profit.

karleone:


Long but lovely write up...
As for me, I've always had difficulties understanding this CBN & BDC monetary exchange policy. I've always looked out for explanations nd is yet to find one. But, you talked about this: According to the CBN, it sells about US$1.5 billion/year to
BDCs in the country at N197.0/dollar. The BDCs however sell
to the average Nigerian on the street for as high as N260/
N270/dollar. It means on the average, each BDC was making
about N73.0 on each dollar bought. And I ask, how is the BDC making profit from this exchange? Is it from changing Naira to Dollar for the retailers (as you tagged You and I) or by changing from Dollar to Naira?

BDCs were created to ease the transactions of the retail foreign exchange market. CBN gives them FX at 199, they sell them to those with Naira at 300, Profit made by them is 103NGN.

So they make their profit from changing the dollars from CBN to Naira from You and I.

Seun:
If they are still maintaining the so called official rate instead of selling the forex by auction, the result will be exactly the same as with the BDCs.

What do you mean by "selling forex by auction"?

They buy 1dollar at 200 naira and sell it to you at 270 naira. so when they sell, they make 70 naira profit.

When they buy, they buy at from you assume you have dollar to sell to them. They buy from you at 250 Naira and sell to others who wants to buy at 270 naira. In this case they make only 20 naira.

So, it is more profitable to them to keep buying from CBN!

[quote author=karleone post=42581927][/quote]

Man... you really broke this down. great job

davide470:
It was the great philosopher 2face Idibia that said “I wake up in the morning and I brush up my teeth, say a little prayer and then out to the streets” You must have noticed he placed no emphasis on taking a bath. These days, one more step has been added to the routine – You have to check for what new policy the CBN has introduced.

For someone like me (and I’m sure you too), it’s getting really hard to keep up. Can we just go back to the days when our worry was the cruel manner in which the size of noodles was reduced? Can we return to the happy days when we only worried about what Eedris Abdulkareem was saying in those songs?

These days, everyone is talking about oil prices, dollars, devaluations, policies and what not. Most especially those of us with no dollars, we are the ones shouting the most like we have anything to really worry about.

We all do actually.

At this point, for the sake of those of us who haven’t had light since 2013, who have no access to news, newspapers or noisy neighbors and who basically are not aware of the various policies the CBN has dropped faster than Olamide drops albums, here’s an update:

1. In February 2015, the CBN scrapped its official dollar market to reduce its weekly dollar sales to market participants. This is like shutting down shoprite across the nation to reduce random, frequent shopping activity.

2. June 2015 saw the ban of some items (41 of them in particular) from accessing dollars from the CBN. This is similar to your dad not giving you money to buy Internet data/Brazilian hair to ensure some money is saved. You might consider it harsh, but it’s a wise decision considering the times.

3. Then in September 2015, we were constrained from depositing foreign currency into our domiciliary account. This was to prevent the ‘dollarization of the economy’. In other words, ensure that the Naira is still the national currency. After all, you’ve not used Naira to buy even pure water on the streets of America.

4. CBN further restricted the amount people on foreign trips can withdraw from their bank account to US$300/day – like reducing pocket money
Finally, well maybe not, CBN has recently stopped the sale of dollars to BDC (Bureau De Change – Mallams).

5. Oh and in a reversal of policy 3, we can now pay in forex into our domiciliary accounts again. Somebody shout hallelujah!!!

As the price of crude oil drops, our foreign reserves have also plummeted and it is in a bid to prevent further drop that policy 5 (on BDC) was put in place. Let’s look at the CBN as the father in the home and the BDC as his way of ensuring all the kids have access to a certain ‘lifestyle’. It is the role of the father (CBN) to ensure there is money in the home (our foreign reserves)– the kids do not have direct access to the money, so the father withdraws to provide for their needs. But the reserves are being depleted each time the father draws on it and the source of buildup has almost dried up, so the father withdraws his support and alters their lifestyle a little.

According to the CBN, it sells about US$1.5 billion/year to BDCs in the country at N197.0/dollar. The BDCs however sell to the average Nigerian on the street for as high as N260/N270/dollar. It means on the average, each BDC was making about N73.0 on each dollar bought.

That’s a whole lot of profit, right? WOW!

And you know what happens when our fellow Nigerians get wind of such profit making ventures? Everyone wants to jump on it! So more persons wanted the BDC license and the number of BDCs in the country grew from just 74 in 2005 to 2,786 as at the end of December 2015 – an astronomical increase of 3,665.0% in just 10 years. And that’s not all; about 150 entities apply to the CBN every month to obtain the BDC license, which means more trouble for the reserves. Even Standard Chartered Bank- was not getting as many forex requests as this!

The problem was that the consumers who require the BDC service were still not getting the access to it. BDCs were created to ease the transactions of the retail foreign exchange market i.e. you and I travelling around needing small change. It appears (and CBN caught them red-handed) that this was not being done, hence the policy to source outside of the CBN.

So just in case you have a boyfriend who operated a BDC and you’re rolling on the floor crying because he told you he no longer has a source of income, don’t believe just yet. The BDCs are now expected to source dollars from IOCs (international Oil Companies), exporters and other legal autonomous sources.

But then, how exactly does this affect you and I?

The general key impact of the falling Naira is in the value of the money in your pocket or wallet. As the value of the Naira falls, it means the price of imported items or commodities increases, which reduces the quantity of what we can buy. So, the value of your N5,000 hourly income reduces anytime the Naira depreciates.

Please, we are not asking you to ask for higher pay from your employer o.

On a bright note, the current situation presents enormous opportunities for local manufacturers/producers to compete with the foreign counterparts. For instance, rather than buy clothes at Asos or Zara, most of us will just visit Sura the tailor for a quick “cut and sew”- in the words of us travelers ‘bespoke or localized pret-a-porter’. Might I add, save more money and eat local rice- go Ofada rather than international Caprice.

So, if there is something you are good at making, this is the best time for you to step-up and properly position your business to tap into the enormous opportunities the current Naira situation has thrown-up.

What about not being able to use the Naira master cards for foreign online purchase?

hopilo:
Bottom line, I can not pay my UK fees even with the use of official form A. i completed this form for about 4 weeks now but the bank still tell me they are biding for dollars. Time means money, let CBN review this to help many students that are stranded.

Which bank id you go to?





@op This is a beautiful read,i enjoyed it. Although you didn't mention the new policy on maintaince charge on current accounts.

@ op, I dont know how correct your explanations are but Bravo anyway!

karleone:


What do you mean by "selling forex by auction"?

They should sell FOREX the same way they sell treasury bills. Offer a certain amount of dollars and let people bid the rate they want to pay for it. Then pick a winning rate and sell to all those who bid above that amount. This will support the naira to the maximum extent possible.

Am in need of Export Proceeds...

Any one who has or knows anyone who has should please contact me ASAP!

davide470:
BDCs were created to ease the transactions of the retail foreign exchange market. CBN gives them FX at 199, they sell them to those with Naira at 300, Profit made by them is 103NGN.

So they make their profit from changing the dollars from CBN to Naira from You and I.

Are you a banker?

kaboninc:


Are you a banker?

Not quite. Financial Services sector.

davide470:
Not quite. Financial Services sector.

Hmmmm..... I wish I can say it out

ksstroud:


Hmmmm..... I wish I can say it out

Lol