Discontinuation of FX to BDC will affect exchange rate

Analysts at Cordros Research Ltd. said discontinuation of sale of foreign exchange to the Bureau De Change (BDC) operators would lead to further pressure on the exchange rate in the parallel market.
The analysts said this in a post on the Monetary Policy Committee (MPC) that the discontinuation of the sale of foreign exchange to the BDCs would put further pressure on the exchange rate as the commercial banks settle to adjust to the Central Bank of Nigeria (CBN) directive.
The analysts added that knee jerk reaction from market participants induced by the urge to stockpile the greenback to mitigate an expected exchange rate pressure was another factor.
“Overall, we believe the effectiveness of the modalities in disbursing the greenback to the retail segment through the commercial banks would determine how much the current rates at the parallel market will diverge from the NAFEX rates,” they said.
CBN Governor, Mr Godwin Emefiele, said the BDC operators had abandoned the objectives of their establishment, which is to serve the retail end-users who needed 5,000 dollars or less.
Emefiele said they had become wholesale dealers and illegally transacted FX to the tune of millions of dollars per transaction.
Given the rent-seeking behaviour of the BDCs, the MPC decided with immediate effect to discontinue the sale of FX to the BDCs and allow the CBN to no longer process or issue new licenses for BDC operations in the country.


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