The Central Bank of Nigeria has directed commercial banks in the country to create mobile applications that will enable easy sales of foreign exchange (FX or forex) to retail customers.

The directive comes after the CBN, on Tuesday, halted its weekly allocation of forex to Bureau de Change companies (BDCs), whose primary responsibility is the sale of minimal amounts of dollars to citizens for small-time payments such as overseas school fees. The regulator had accused them of violating their terms of operation.

According to the apex bank, money changers in the country have been involved in manipulating exchange rates, rent-seeking, and money laundering activities. It plans to commence the refund of licensing fees and the ₦35 million minimum capital deposits to applicants of BDC licenses soon.

In the place of BDCs, the CBN will channel its weekly allocations of foreign currency sales to deposit money banks (DMBs), Governor Godwin Emefiele said. This means individuals and business people who want to buy forex have to do so from banks.

It is expected that banks will take some time to adjust to this new directive. However, the CBN is moving swiftly in getting them to implement its policy change.

In a follow-up circular issued on Wednesday, the regulator instructed commercial banks to set up teller points dedicated to serving the legitimate forex needs of customers.

“Further to the Monetary Policy Committees (MPC briefing of July 27, 2021, Deposit Money Banks (DMBs) are hereby reminded to set up teller points at designated branches across the country to fulfil legitimate FX requests,” the circular reads.

Banks also have to “adequately publicise” the locations of the designated branches and make necessary arrangements to sell FX to customers in cash and/or electronically in compliance with its regulations.

No customer should be turned back or denied access to forex provided that documentation and all other requirements are satisfied equally, according to the CBN.

The banks are also required to create mobile applications and alert systems to update customers on the status of their foreign exchange requests.

In the event of unresolved complaints related to FX requests, the CBN says it has set up toll-free lines for Nigerians to escalate such issues while warning banks against “undue delays rationing and/or diversion of FX.”

These directives and moves by the CBN appear to be aimed at enabling banks to fill the void that will be created without BDCs in the official forex supply chain.

One of the concerns with the CBN’s policy change is that it’s likely to cause a temporary scarcity of forex from official sources. This is because licensed money changers play a crucial role in facilitating the supply of forex to Nigerians.

The wide network of the 5,600+ licensed BDC operators has been a reliable and easy go-to source for Nigerians quickly seeking foreign currency for education, travel, and other minor transactions. 

While commercial banks equally have branch networks across the country, they’re not exactly high on the ranking of institutions easiest to deal with. 

Legacy financial institutions in Nigeria have a history of bureaucratic mazes and excessive documentation that have kept millions of adult Nigerians away from the banking world. Their nature will also most likely make it far more difficult to access foreign currencies, hence the CBN’s directives.

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The regulator’s decision to ban forex sales to BDCs, though erratic, is widely seen as necessary to avoid the “dollarisation” of the Nigerian economy. 

However, there are concerns over the loss of jobs that will come as a result of some operators being put out of business and the potential impact on the exchange rate over the short-to-medium term.

In the wake of the new directive, the local unit has plunged in parallel markets, where currencies are traded informally. The exchange rate closed at ₦520/$1 on Thursday from ₦504 on Monday.

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Michael Ajifowoke | Author

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