Nigerian Bureau De Change operators to source forex independently

The Association of Bureau De Change Operators of Nigeria is facing a significant challenge following the decision by the Central Bank of Nigeria to halt the provision of foreign exchange to its members. This move has left BDC operators seeking alternative sources for foreign currency as they navigate the changing landscape of the FX market in Nigeria. In a recent interview on CNBC Africa, Kayode Akindele, a Partner at TIA Capital, discussed the implications of the CBN's decision and the reactions from the BDC operators. Akindele highlighted the history of BDCs sourcing from other avenues back in 2016 and expressed hope that the CBN has learned from that experience to manage the current situation better. The key theme of the discussion revolved around the mixed reactions to the CBN's discontinuation of FX to BDC operators. While some have praised the move, others have raised concerns about the capacity of commercial banks to meet the surge in demand that may result from the withdrawal of support to BDCs. Akindele acknowledged the short-term dislocation that may occur in the parallel market as it adjusts to the new policy. He emphasized the need for the CBN to address issues such as the exclusion of certain items from official exchange rates, which could lead to arbitrage and further market disruptions. The commercial banks have reassured the public of their readiness to handle legitimate FX demands and manage the transition effectively. Akindele noted that the banks are already familiar with providing FX services and would need to increase their efforts to meet the demand previously serviced by BDCs. Regarding the potential exchange rate adjustments, Akindele suggested that the market may settle around 450 Naira to the dollar in the near term but doubted a significant drop to 425 Naira. He pointed out the seasonal factors such as school fees payments that could impact the FX market in the coming months. The International Monetary Fund (IMF) is likely observing these developments closely, considering Nigeria's history of FX rate reforms and the IMF's emphasis on rate convergence. Akindele anticipated that the IMF would view the CBN's efforts to harmonize the FX rates positively, which could signal progress in the ongoing reforms in Nigeria. In conclusion, Akindele endorsed the CBN's decision as a necessary step to address the discrepancies and arbitrage in the FX market. He emphasized the importance of curbing the influx of BDCs driven by arbitrage opportunities and called for a more stable and transparent FX market in Nigeria. As the BDC operators strategize to adapt to the new FX landscape, the coming months will be crucial in determining the effectiveness of the CBN's policy and the resilience of the commercial banks in meeting the FX demands of the Nigerian market.