CBN position is the best unless we want to drag ourselves to the circles of hyprocrate.
Those CBD people are greedy set of human beings. If you go to Sheraton hotel in Abuja you see the there with no any rules and regulations guiding them. All of them sells at different prices of their choice sometimes they even sell based on tribe self.
CBN controlling the black market will be the new good beginnings of naira ND dollar
I also hope those banks will comply with CBN rules and conducts.
Ngasky: The BDC's are criminals. But on another note this guy did nothing in the video. If you are analysing something you must proffer solution after stating the problem. But unfortunately he didn't proffer any other feasible solution. Imagine BDC operator gaining profit of more than 100 naira for every single dollar. How can you regulate them to stop? Money is the root of evil. And these people have enough to buy off any agency inspecting them. I believe the solution is exactly what CBN did. Whoever needs dollar should go to his bank and use his account to buy at the official rate. It will be easier for CBN and financial regulators to know who buys what currency and what he aims to do with it. Nobody will come every week claiming he needs dollars. So it can be controlled. The problem is the criminals and corrupt government employees (civil/public) that will contunue to look for dollar to keep as security. For now the BDCs' are claiming it is business as usual. But with time they will run out of foreign currency and that market will collapse. someone will think scarcity will make dollar to appreciate but look at this now anybody can access the dollar at the official rate from his personal bank. so who will leave official rate and go and pay 100+ more naira per single dollar from black market? Now people will think someone with physical dollar will not go to bank to sell his $ because it is more at the black market. but the same black market will crash because if they cant sell because everyone is buying from bank. so if they cant sell definitely they will not buy. or at least they will only buy below the official bank rate. so this will force the customer to go to the bank. Imagine 5000 BDC in 37 states. that is more than 135 BDC company in each state in Nigeria�. something is definitely wrong
AnonPoet: Will ₦900 Naira be equal to $1 Dollar in 2021? In this video, Finance & Tech Reviewer, Fisayo Fosudo shares a very detailed analysis about the new CBN policy regarding the ban on the sale of foreign exchange to the BDC (Bureau de Change) as well as how speculators think the dollar rate would be against the Naira.
During the Monetary Policy Committee Meeting that the CBN regularly has, the CBN governor announced on the 27th of July that they would stop selling forex, dollars especially, to the Bureau De Change Operators, and the reason cited was because of the unwholesome business practices by the BDCs that are putting a lot of pressure on the Naira. What does this mean for Nigerians and the economy? This is an attempt to look at both sides:
What is Going on?
In the year 2000, BDC operators in the country were only 74, in the range of the year 2010 and 2016, that number rose to 2,000 BDC operators and in 2018 to the 2021 year range, that number went up to 5,000 BDC operators in Nigeria. The thing is Nigeria has 2 markets, the Normal Import and Export Window market or the Bank rate and then the parallel or black market rate. Historically, the black market rate has always been higher, there was a time when Naira to the dollar was 22 on the normal rate and Naira to the dollar was 87 on the black market.
What have the BDCs been doing?
The CBN governor was receiving over 500 applications for BDCs every month and analysts claim many BDCs were flouting the rules of FX Guidelines by selling more than $5,000 per person or even getting more than one license to access the $20,000 (per license) weekly allocation from the CBN to the BDCs. A license requires that the BDCs deposit a minimum capitalization of 35 million Naira. Previous CBN FX Sale Stop
The CBN has in fact discontinued selling of foreign exchange to the BDCs before. in 2016, Nigeria went into a recession because of the low oil prices. The CBN stopped selling dollars to BDCs partly because dollars from oil sales and foreign investors stopped coming in, the federal reserve also fell below the CBN’s target point. The dollar rate rose against the naira.
In January of 2016 and the CBN governor said that the bank has been selling at 197 to the BDCs, they have become greedy and are selling at 250 to ordinary Nigerian people. According to Nairametrics and a frame of reference, in January of 2016 when the CBN banned BDCs, the exchange rate was 268 per $1, in December of 2016, it went crazy to 495 per $1. We had a 46% currency devaluation and an 85% dollar gain against the naira. Basically, if you had $100 in January of 2016, it was 26,800 and by December it was 49,500 naira.
What will happen?
Just like the last time, the dollar rose against the Naira and subsequently stayed at 360 when the CBN was able to attract dollars from overseas with high interest from investors. This time around there’s a prediction that dollar will rise to 600 Naira per $1 or if we go by the 2016 number or 925 naira per $1 in December of 2021. I mean, It rose sharply to 525 from 500 per $1 just 1 day after the CBN made this recent 2021 announcement but it’s said that it would go even higher. At least in the short term. Fortunately, over the course of the days, it gained against the dollar and even went below 500 which is a major positive.
The CBN has taken many power moves and said that 1) Any Bank conniving with BDC now will be sanctioned. 2) They have in fact released 200 million dollars to banks so that people can buy directly, from their banks and 3) The CBN has even put out a letter stating that Bank should have teller points at their branches for the sale of FX to retail customers. Especially for people who want o request for Personal or Business Travel Allowance, School Fees, Medical Payment, Business transactions amongst others
The Aftermath - What does the Future Hold?
Analysts are looking at the fact that this move will drive the dollar rate up really high, at least in the short run and many people will take advantage of it. Do note that they have not banned BDCs or seized anyone’s licenses so people are still patronizing BDCs, however, the thing is that because of this shocking news, people might want to buy and hoard more in fear that the rate would go higher, which will make it go higher because there’s a lot of demand.
Many reputable analysts have advised that the CBN should just sell to the BDCs at that same very high rate of maybe 490 and force them to sell at 500 in the black market. Some also say Nigeria should just devalue the currency at 500 and let’s call it a day. This move might force BDCs to increase the price, causing the dollar to even rise further but again if it can be stabilized, the BDCs will lose almost 90% of their profits, the Nigerian people will gain.
The ultimate advice that can help Nigeria is that we find a way to make even more foreign exchange and not just demand for foreign exchange, it means more freelancers, higher oil prices even can help as it always helps, oil got us here anyway, we need to export way more and bring in more dollars so we can have the bargaining power, we also need to produce and consume locally, that is buying Nigerian and selling Nigerian.
Do you think Nigeria would export way more than we import? Would Nigerians suddenly start buying more locally produced goods and food and would inflation stop rising? Only time would tell, but I want to know your own thoughts about the situation in the comments below.
Nairaland is the most smartest website I know in Nigeria, So even after dropping the video, we still get the speech because some us manage data. ; so D; we just read
MJlee31: I think the best way is for the CBN to impose a stricter sanctions on the BDCs and banks that are selling to make exorbitant profit... The CBN should also formulate a policy that will eradicate the sale of dollars in the black market.. and only sale to the banks.
Of only sold to the banks, it create a monopolistic environment, therefore, making it even more difficult for people like u and I to access, except the price is regulated tho.
ursullalinda: For me the CBN should maintain their stand......no selling of forex to BDC's.......whatever we are going through now will be a short term headache but on the long run dollar will come down......BDC operators are damn too greedy and don't care about the economy of the country......but since they are mostly northerners can this administration maintain their stand?
Our exchange rate is not based on the BDC activities. It is actually based on the fact that we import most of our consumables. This puts a very high demand on the dollar. Since the CBN cannot give everyone who need dollar the money, people go to BDC even if they have to buy it at twice the price. Of course, since Nigerians DONT have alternatives to sourcing Pencils, Rulers, Papers, Pens, Clothings, Phones, Laptops, Cars, Tires, Engine Oil etc Naira will continue to devalue.
What a pity! But the dumb government doesn't seem to know what to do about it.
Unlettered: The thing is whether we like it or not, we re mostly to blame for the devaluation of the naira. As stated in the thread, alot of people will now hoard the dollar so as to gain something later in the year. So basically we re making the scarcity even hard on ourseves based on our selfish interest.
Alot of the BDC people use their license to go into business with yahoo boys who send them money that can be collected in later times.
The case of naira to dollar is similar to that of PMS sellers. We believe that it can not controlled but as we re now, we have forgotten the last time we had fuel scarcity in the nation. What needs to be worked on is how the govt can actually make the naira appreciate with this new development by stopping the BDC. I believe it will work someday.
God bless nigeria.
Our exchange rate is not based on the BDC activities. It is actually based on the fact that we import most of our consumables. This puts a very high demand on the dollar. Since the CBN cannot give everyone who need dollar the money, people go to BDC even if they have to buy it at twice the price.
Nigerians DONT have alternatives to sourcing Pencils, Rulers, Papers, Pens, Clothings, Phones, Laptops, Cars, Tires, Engine Oil etc Naira will continue to devalue.
What a pity! But the dumb government doesn't seem to know what to do about it.
AnonPoet: Will ₦900 Naira be equal to $1 Dollar in 2021? In this video, Finance & Tech Reviewer, Fisayo Fosudo shares a very detailed analysis about the new CBN policy regarding the ban on the sale of foreign exchange to the BDC (Bureau de Change) as well as how speculators think the dollar rate would be against the Naira.
During the Monetary Policy Committee Meeting that the CBN regularly has, the CBN governor announced on the 27th of July that they would stop selling forex, dollars especially, to the Bureau De Change Operators, and the reason cited was because of the unwholesome business practices by the BDCs that are putting a lot of pressure on the Naira. What does this mean for Nigerians and the economy? This is an attempt to look at both sides:
What is Going on?
In the year 2000, BDC operators in the country were only 74, in the range of the year 2010 and 2016, that number rose to 2,000 BDC operators and in 2018 to the 2021 year range, that number went up to 5,000 BDC operators in Nigeria. The thing is Nigeria has 2 markets, the Normal Import and Export Window market or the Bank rate and then the parallel or black market rate. Historically, the black market rate has always been higher, there was a time when Naira to the dollar was 22 on the normal rate and Naira to the dollar was 87 on the black market.
What have the BDCs been doing?
The CBN governor was receiving over 500 applications for BDCs every month and analysts claim many BDCs were flouting the rules of FX Guidelines by selling more than $5,000 per person or even getting more than one license to access the $20,000 (per license) weekly allocation from the CBN to the BDCs. A license requires that the BDCs deposit a minimum capitalization of 35 million Naira. Previous CBN FX Sale Stop
The CBN has in fact discontinued selling of foreign exchange to the BDCs before. in 2016, Nigeria went into a recession because of the low oil prices. The CBN stopped selling dollars to BDCs partly because dollars from oil sales and foreign investors stopped coming in, the federal reserve also fell below the CBN’s target point. The dollar rate rose against the naira.
In January of 2016 and the CBN governor said that the bank has been selling at 197 to the BDCs, they have become greedy and are selling at 250 to ordinary Nigerian people. According to Nairametrics and a frame of reference, in January of 2016 when the CBN banned BDCs, the exchange rate was 268 per $1, in December of 2016, it went crazy to 495 per $1. We had a 46% currency devaluation and an 85% dollar gain against the naira. Basically, if you had $100 in January of 2016, it was 26,800 and by December it was 49,500 naira.
What will happen?
Just like the last time, the dollar rose against the Naira and subsequently stayed at 360 when the CBN was able to attract dollars from overseas with high interest from investors. This time around there’s a prediction that dollar will rise to 600 Naira per $1 or if we go by the 2016 number or 925 naira per $1 in December of 2021. I mean, It rose sharply to 525 from 500 per $1 just 1 day after the CBN made this recent 2021 announcement but it’s said that it would go even higher. At least in the short term. Fortunately, over the course of the days, it gained against the dollar and even went below 500 which is a major positive.
The CBN has taken many power moves and said that 1) Any Bank conniving with BDC now will be sanctioned. 2) They have in fact released 200 million dollars to banks so that people can buy directly, from their banks and 3) The CBN has even put out a letter stating that Bank should have teller points at their branches for the sale of FX to retail customers. Especially for people who want o request for Personal or Business Travel Allowance, School Fees, Medical Payment, Business transactions amongst others
The Aftermath - What does the Future Hold?
Analysts are looking at the fact that this move will drive the dollar rate up really high, at least in the short run and many people will take advantage of it. Do note that they have not banned BDCs or seized anyone’s licenses so people are still patronizing BDCs, however, the thing is that because of this shocking news, people might want to buy and hoard more in fear that the rate would go higher, which will make it go higher because there’s a lot of demand.
Many reputable analysts have advised that the CBN should just sell to the BDCs at that same very high rate of maybe 490 and force them to sell at 500 in the black market. Some also say Nigeria should just devalue the currency at 500 and let’s call it a day. This move might force BDCs to increase the price, causing the dollar to even rise further but again if it can be stabilized, the BDCs will lose almost 90% of their profits, the Nigerian people will gain.
The ultimate advice that can help Nigeria is that we find a way to make even more foreign exchange and not just demand for foreign exchange, it means more freelancers, higher oil prices even can help as it always helps, oil got us here anyway, we need to export way more and bring in more dollars so we can have the bargaining power, we also need to produce and consume locally, that is buying Nigerian and selling Nigerian.
Do you think Nigeria would export way more than we import? Would Nigerians suddenly start buying more locally produced goods and food and would inflation stop rising? Only time would tell, but I want to know your own thoughts about the situation in the comments below.
Rubbish... Nigerian always claiming to know something but they ended up knowing nothing.
The only way out is to encourage export business so we can earn more foreign exchange…
But the truth still remains that govt agencies is dealing seriously with the export business. Ask me why. Am into trans.and the last thing I will do again is to transport export container to the seaport.. You will pay bribe of nothing less than 200k and it will still take up to two to three weeks to drop the container at the port.. Lasma,police,navy areaboys,NPA. Will be bitten the drivers on a daily bases denying them access road to port,just to make sure you settle well after doing the necessary things you need to do As am talking now very few transporter will agree to do export work.
And we’re talking about earning foreign currency. Govt should first create an environment for export business in Nigeria and priorities the access road. If possible they should send their DSS to clear the roads and arrest those people that hindered the movements of trucks going to seaport… If not dollars is heading to 1000k before december 2021
Ngasky: The BDC's are criminals. But on another note this guy did nothing in the video. If you are analysing something you must proffer solution after stating the problem. But unfortunately he didn't proffer any other feasible solution. Imagine BDC operator gaining profit of more than 100 naira for every single dollar. How can you regulate them to stop? Money is the root of evil. And these people have enough to buy off any agency inspecting them. I believe the solution is exactly what CBN did. Whoever needs dollar should go to his bank and use his account to buy at the official rate. It will be easier for CBN and financial regulators to know who buys what currency and what he aims to do with it. Nobody will come every week claiming he needs dollars. So it can be controlled. The problem is the criminals and corrupt government employees (civil/public) that will contunue to look for dollar to keep as security. For now the BDCs' are claiming it is business as usual. But with time they will run out of foreign currency and that market will collapse. someone will think scarcity will make dollar to appreciate but look at this now anybody can access the dollar at the official rate from his personal bank. so who will leave official rate and go and pay 100+ more naira per single dollar from black market? Now people will think someone with physical dollar will not go to bank to sell his $ because it is more at the black market. but the same black market will crash because if they cant sell because everyone is buying from bank. so if they cant sell definitely they will not buy. or at least they will only buy below the official bank rate. so this will force the customer to go to the bank. Imagine 5000 BDC in 37 states. that is more than 135 BDC company in each state in Nigeria�. something is definitely wrong
Nice analysis but I beg to differ. I feel they will still sell. FG doesn't have enough dollars to go round, so they will limit how much you could get. Also, there are some businesses that you can't get USD at an official rate for. So you will be forced to get USD at the black market.
Oil is not selling , that's our mainstay to earn dollars.Diversification is the only way out. It will get worse before it gets better. If we don't export a lot of items to earn USD, we are deceiving ourselves. We need to produce locally what we normally get from abroad. No two way around it. You cant trust the banks to be honest over the little USD being disbursed by the FG.
Corruption and lack of diversification have finished Nigeria as a Nation but we are still optimistic.
Hamburgfinest: The only way out is to encourage export business so we can earn more foreign exchange…
But the truth still remains that govt agencies is dealing seriously with the export business. Ask me why. Am into trans.and the last thing I will do again is to transport export container to the seaport.. You will pay bribe of nothing less than 200k and it will still take up to two to three weeks to drop the container at the port.. Lasma,police,navy areaboys,NPA. Will be bitten the drivers on a daily bases denying them access road to port,just to make sure you settle well after doing the necessary things you need to do As am talking now very few transporter will agree to do export work.
And we’re talking about earning foreign currency. Govt should first create an environment for export business in Nigeria and priorities the access road. If possible they should send their DSS to clear the roads and arrest those people that hindered the movements of trucks going to seaport… If not dollars is heading to 1000k before december 2021
That's part of the corruption we are talking about. The police and other related agencies are something else
ursullalinda: For me the CBN should maintain their stand......no selling of forex to BDC's.......whatever we are going through now will be a short term headache but on the long run dollar will come down......BDC operators are damn too greedy and don't care about the economy of the country......but since they are mostly northerners can this administration maintain their stand?
In all of these, I still blame the useless government ran by Jonathan during the oil boom, they didn't even try to diversify, instead they stole enough money to bankrupt the nation.
I call on the CBN governor, Mr. Emefiele to honorably resign for deliberately mismanaging our reserves and foreign exchange. He is well aware of criminal actions perpetrated by actors in that industry but he chose to do nothing to this point.
I call on all well meaning Nigerians to lend their voice in demanding his resignation immediately.
An incompetent person should never be placed in such position of authority.
MJlee31: I think the best way is for the CBN to impose a stricter sanctions on the BDCs and banks that are selling to make exorbitant profit... The CBN should also formulate a policy that will eradicate the sale of dollars in the black market.. and only sale to the banks.
Why can't CBN just make banks increase the limits for transaction on their ATM cards to say $1000 per month, instead of the meager $100?
That way, most people will just transact using their ATM cards and only heavy users will head to the bank
Unlettered: The thing is whether we like it or not, we re mostly to blame for the devaluation of the naira. As stated in the thread, alot of people will now hoard the dollar so as to gain something later in the year. So basically we re making the scarcity even hard on ourseves based on our selfish interest.
Alot of the BDC people use their license to go into business with yahoo boys who send them money that can be collected in later times.
The case of naira to dollar is similar to that of PMS sellers. We believe that it can not controlled but as we re now, we have forgotten the last time we had fuel scarcity in the nation. What needs to be worked on is how the govt can actually make the naira appreciate with this new development by stopping the BDC. I believe it will work someday.
God bless nigeria.
"As stated in the thread, alot of people will now hoard the dollar so as to gain something later in the year"
I don't think people are buying dollar to gain something later. I think why they do that is to preserve the value of their money. You make no gain buying dollar today and selling 6 months later, all you have done is tried to keep you purchasing power. Afterall cost goods and services would have increased due to inflation. 2019 November, a friend bought and paid into his dom acct $30k @ (360/$)₦10,800,000. 20k pounds@(480)₦9,600,000 Total=₦20,400,000. Today he needs ₦29,700,000 to buy same amount of money from same abokii. He has lost ₦9,300,000 in the value of his money had he kept it in the bank in naira.
If Nigeria's forex flows can be explained in the light of this analysis by op, it would be kinda easy to solve.
Fx is needed by different categories of people and the demand is huge. Legitimate demands, that is. However, even with our love of imports, Nigerians are not a lazy people. There is a very huge undocumented amount of dollar flowing into Nigeria. With a little tweaking, we would be able to stabilize the naira. The goal is stability anyway, not just appreciation.
However, there is a huge demand for dollars that have no reason, no rationalization, no explanation, no logic, that is killing our country. The demand for dollars by politicians, and people in high places.
These fx purchases have no economic rationale. They are willing to buy at any price, and these fx either get stashed away in safehouses, or smuggled out in their millions. These buyers, mainly made up of the kleptomaniac leadership in Nigeria today, create the illicit financial flows that has rendered all economic attempts at stabilising the naira, unsuccessful.
The solution is not economic. It is political. And it requires courage, and a willingness by whoever it is at the helm of affairs to lose power and let Nigerians gain it.
How that can be done is matter for another discussion. But for now, these politicians will pay any premium necessary to get the dollars, and thus, render any efforts by CBN fruitless.
But my opinion is if the banks and the BDCs are well and faithfully monitored, and sabotage and other Nigerian factors are prevented, plus wielding the lawful big stick in cases of recalcitrance, Naira will be saved A BIT.
Basically, local production of necessities and wants consumed in Nigeria will save it a big deal. Diversification of the economy too? Yes.
However, practical and truthful provision of security of lives and property is the basis of any thriving economy. That Buhari has not provided. For instance, commercial and subsistent farmers cannot get to farms any more as his kinsmen, Fulani herdsmen, terrorists called bandits, etc are unleashed on everyone and everything showing signs of life across Nigeria. And his Fulani-dominated military, paramilitary and police forces senselessly conniving with and backing them up. Any voice of protest is silenced with lethal force.
When people can no longer produce the good and services they need, they will become slaves. Their calamities will include inflation, hunger, increased insecurity, borrowing, begging, etc. It's no surprise that the Nigerian economy has increased its rate of beggars turnout geometrically under Buhari just as his government itself is now a shameless 'international fine bara' and servant to lenders.
Nigerians now depend on importation for everything: food, water, clothing, shelter, air, husbands, wives, etc. Name it, nothing they don't import... not to even mention that they have initially been subjected to imported deaths. Is that a good economy that guarantees a strong currency? An economy run by terrorists for terrorists, is that an economy? Has a country run by terrorists ever developed a virile economy?
The rogue government led by the chief executive terrorist is a destroyer, nothing good can come out of it.
The problem is simple: Buhari since the assumption of office has refused to allow the official exchange rate be determined by the market, hence the huge disparity between the official rate and parallel market rate.
His incurable hatred of the devaluation of the currency has been the Naira's albatross. How do you expect the Naira to maintain its value when oil prices drop?
The gap between the official rate and parallel rate must close. Lamido Sanusi, the ex CBN governor said any gap of more than 3% between the official rate and that of the parallel market will lead to sharp practices. Lamido and Soludo did their best to keep the gap within that limit.
Ever since Buhari attained office, he fixed the Naira ending the flexible exchange policies Soludo and Sanusi followed which had worked so well. The gap under Buhari has averaged at least 15% and at times touched 70%! Why won't there be sharp practices.
Atedo Peterside called Buhari an economic illiterate.
Ngasky: The BDC's are criminals. But on another note this guy did nothing in the video. If you are analysing something you must proffer solution after stating the problem. But unfortunately he didn't proffer any other feasible solution. Imagine BDC operator gaining profit of more than 100 naira for every single dollar. How can you regulate them to stop? Money is the root of evil. And these people have enough to buy off any agency inspecting them. I believe the solution is exactly what CBN did. Whoever needs dollar should go to his bank and use his account to buy at the official rate. It will be easier for CBN and financial regulators to know who buys what currency and what he aims to do with it. Nobody will come every week claiming he needs dollars. So it can be controlled. The problem is the criminals and corrupt government employees (civil/public) that will contunue to look for dollar to keep as security. For now the BDCs' are claiming it is business as usual. But with time they will run out of foreign currency and that market will collapse. someone will think scarcity will make dollar to appreciate but look at this now anybody can access the dollar at the official rate from his personal bank. so who will leave official rate and go and pay 100+ more naira per single dollar from black market? Now people will think someone with physical dollar will not go to bank to sell his $ because it is more at the black market. but the same black market will crash because if they cant sell because everyone is buying from bank. so if they cant sell definitely they will not buy. or at least they will only buy below the official bank rate. so this will force the customer to go to the bank. Imagine 5000 BDC in 37 states. that is more than 135 BDC company in each state in Nigeria�. something is definitely wrong
Fantastic analysis. Good thinking, Good product! !
lessonotes: Nice Fundamentals, but I don't think it would rise that high. A BDC agent told me today that those that buy and sell USD above NGN500 are frauds and that I should avoid them. They sell fake USD
Ngasky: The BDC's are criminals. But on another note this guy did nothing in the video. If you are analysing something you must proffer solution after stating the problem. But unfortunately he didn't proffer any other feasible solution. Imagine BDC operator gaining profit of more than 100 naira for every single dollar. How can you regulate them to stop? Money is the root of evil. And these people have enough to buy off any agency inspecting them. I believe the solution is exactly what CBN did. Whoever needs dollar should go to his bank and use his account to buy at the official rate. It will be easier for CBN and financial regulators to know who buys what currency and what he aims to do with it. Nobody will come every week claiming he needs dollars. So it can be controlled. The problem is the criminals and corrupt government employees (civil/public) that will contunue to look for dollar to keep as security. For now the BDCs' are claiming it is business as usual. But with time they will run out of foreign currency and that market will collapse. someone will think scarcity will make dollar to appreciate but look at this now anybody can access the dollar at the official rate from his personal bank. so who will leave official rate and go and pay 100+ more naira per single dollar from black market? Now people will think someone with physical dollar will not go to bank to sell his $ because it is more at the black market. but the same black market will crash because if they cant sell because everyone is buying from bank. so if they cant sell definitely they will not buy. or at least they will only buy below the official bank rate. so this will force the customer to go to the bank. Imagine 5000 BDC in 37 states. that is more than 135 BDC company in each state in Nigeria�. something is definitely wrong
Good analogy but you are still missing some things.
Check history... and proffer solutions that matter. Bank will just monopolize the thing and if you they are not part of this mess, then...
Our exchange rate is not based on the BDC activities. It is actually based on the fact that we import most of our consumables. This puts a very high demand on the dollar. Since the CBN cannot give everyone who need dollar the money, people go to BDC even if they have to buy it at twice the price.
Nigerians DONT have alternatives to sourcing Pencils, Rulers, Papers, Pens, Clothings, Phones, Laptops, Cars, Tires, Engine Oil etc Naira will continue to devalue.
What a pity! But the dumb government doesn't seem to know what to do about it.
Nope, is not just based on import and export man. Ghana is a very good example.
Nice analysis but I beg to differ. I feel they will still sell. FG doesn't have enough dollars to go round, so they will limit how much you could get. Also, there are some businesses that you can't get USD at an official rate for. So you will be forced to get USD at the black market.
Oil is not selling , that's our mainstay to earn dollars.Diversification is the only way out. It will get worse before it gets better. If we don't export a lot of items to earn USS, we are deceiving ourselves. We need to produce locally what we normally get from abroad. No two way around it. You can trust the banks to be honest over the little USD being disbursed by the FG.
Corruption and lack of diversification have finished Nigeria as a Nation but we are still optimistic.
Nope, is not just based on import and export man. Ghana is a very good example.
The law of demand and supply. whatever is in short supply will become expensive. Dollar (for Nigerians) is in short supply, hence will be more expensive to buy
The OP does not understand how BDCs’ operate or is just working for Emefiele! Prices of currency are determined by the market forces of demand and supply not BDCs! BDCs make returns to CBN for every dollar they collect and sell. These returns comprise of the passport numbers, visa, ticket, BVN and company docs of the recipients of the FX. Emefiele’s CBN has refused to check the returns- you know why? Because more than half of the BDCs belong to Emefiele’s cronies! Emefiele approved over 3000 bdc licenses between 2016 and 2021! Why? He met 2000 BDCs in 2015- made a show of trying to reduce their number by increasing capitalization to 35m but went ahead to double their number! During the tenures of the other CBN governors- BDC licenses were not for sale- serious due diligence was done before approval but Emefiele came and changed all of that- Now Before a BDC can even start the process of applying, Emefiele must approve the name! Emefiele was approving names only for his cronies and they were in turn selling the names to the highest bidders- that was how the business of selling BDC names was birthed! Back to rate- Emefiele deliberately created scarcity in the market ( with all his restrictions on card usage, transfers etc) so that the rate in the parallel market will go high. He also flooded the market with cheap intervention funds... so in other words- too much naira was chasing the dollars! You may ask- Why would any CBN governor do that...? The answer is simple... he is criminal and corrupt! Emefiele floated a bank recently and he knows that the only way for that bank to make money is through round tripping. The economy is contracting- no serious lending going on anywhere- people are not opening new accounts like before- so it will be difficult for his bank to remain afloat- After driving the rates upwards - he is allowing supply only to banks( he has not announced the formula he is using to distribute the fx amongst the banks- i will be surprised if globus, keystone,Taj and some of the favoured banks do not get a higher share)- banks will use the same returns process that BDCs used and CBN will refuse to check because of their selfish interests! Banks will divert the Fx to the parallel market and a few bankers and their CBN backers will smile to the banks with billions of naira profit every week.
Good analogy but you are still missing some things.
Check history... and proffer solutions that matter. Bank will just monopolize the thing and if you they are not part of this mess, then...
Yes the solution to my own belief is the current solution taken by the CBN. Talking of monopoly, all banks in Nigeria where you have account you can get your dollar at the official rate. And remember you have to justify why you need dollars officially and the issue of using multiple accounts in same or different banks does not arise as all your accounts are tied to your bvn and the CBN will be monotoring all the dollar transactions. Also the banks will not allow any sharp practice as they know they will be penalised by the cbn. When cbn penalise a bank it always means they will seize billions of naira from that bank. And definitely any bank that face this. Heads must roll among the staffs of that bank. So whoever is involved no matter how small his actions are must be sacked by the bank. Historically the policy may fall. but taking into cognisant the steps taking by the CBN it will definitely succeed just like how BVN and bank capitalisation succeed. Yes, the BDCs will attempt all they can do to kill the policy. but i dont think the banks will help them because it means more profit for the banks and the punishment by cbn they will never try it. If banks are selling dollars they can't charge above the official rate as all transactions are electronically and cbn has already directed all brancges to open a separate teller point for change only. so you cant just enter bank and hand over naira and receive dollar. you have to complete all documentation. So far this is the best policy by the cbn since bvn implementation
Ngasky: The BDC's are criminals. But on another note this guy did nothing in the video. If you are analysing something you must proffer solution after stating the problem. But unfortunately he didn't proffer any other feasible solution. Imagine BDC operator gaining profit of more than 100 naira for every single dollar. How can you regulate them to stop? Money is the root of evil. And these people have enough to buy off any agency inspecting them. I believe the solution is exactly what CBN did. Whoever needs dollar should go to his bank and use his account to buy at the official rate. It will be easier for CBN and financial regulators to know who buys what currency and what he aims to do with it. Nobody will come every week claiming he needs dollars. So it can be controlled. The problem is the criminals and corrupt government employees (civil/public) that will contunue to look for dollar to keep as security. For now the BDCs' are claiming it is business as usual. But with time they will run out of foreign currency and that market will collapse. someone will think scarcity will make dollar to appreciate but look at this now anybody can access the dollar at the official rate from his personal bank. so who will leave official rate and go and pay 100+ more naira per single dollar from black market? Now people will think someone with physical dollar will not go to bank to sell his $ because it is more at the black market. but the same black market will crash because if they cant sell because everyone is buying from bank. so if they cant sell definitely they will not buy. or at least they will only buy below the official bank rate. so this will force the customer to go to the bank. Imagine 5000 BDC in 37 states. that is more than 135 BDC company in eacstate in Nigeria�. something is definitely wrong
May God more bless you with wisdom and your level of reasons. Really this is what I expect the OP to say not just stating the problem and no solution stated. Thanks bro
