Can Nigeria sustain FX inflows?
The Central Bank of Nigeria says the foreign exchange inflows recorded in the first quarter of this year into Nigeria is about 136 per cent of the total inflows recorded in 2023. Meanwhile, Bureau de Change Operators in the country have rejected the CBN new guidelines which stipulates the minimum capital base for Tier-1 BDCs is 2 billion naira while that of Tier-2 BDCs set at 500 million naira. They say the deadline given is short and the move is against global best practice. Johnson Chukwu, CEO of Cowry Asset Management joins CNBC Africa for more.
Fri, 24 May 2024 12:19:42 GMT
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AI Generated Summary
- Bureau de Change Operators reject CBN guidelines setting new minimum capital bases, citing them as stringent and against global best practices
- Challenges faced by BDCs in meeting increased capital requirements and transferring funds to Central Bank for licensing periods
- Central Bank's efforts to curb inflation through interest rate hikes amidst ongoing economic challenges in Nigeria
Nigeria's Bureau de Change Operators (BDCs) are embroiled in a dispute with the Central Bank over new guidelines setting minimum capital bases for Tier-1 and Tier-2 operators. The CBN stipulates a capital base of 2 billion naira for Tier-1 BDCs and 500 million naira for Tier-2 BDCs, a significant increase from the previous requirement of 10 million naira. The BDCs have rejected these guidelines, citing them as stringent and against global best practices. Johnson Chukwu, CEO of Cowry Asset Management, shared insights on this crucial issue during a CNBC Africa interview. The BDC operators raised concerns about short deadlines and the need to transfer capital to the Central Bank, which would remain there for licensing periods, potentially affecting their operations and profitability. Chukwu highlighted the challenges faced by BDCs in meeting the new capital requirements, especially amidst a weak capacity of the Central Bank to fund their operations effectively. The move to raise capital requirements comes at a time when inflation remains high in Nigeria, driven by factors such as food production and exchange rate pass-through. The Central Bank's efforts to curb inflation by increasing interest rates have not yielded the desired results, highlighting the need for a comprehensive approach to address the country's economic challenges. Chukwu emphasized the importance of improving FX supply and boosting food production to combat inflation effectively. The BDC dispute underscores the complexities of Nigeria's economic landscape, with regulatory decisions impacting key sectors and stakeholders. As the country awaits GDP figures and navigates ongoing economic uncertainties, collaboration between regulators and market players will be crucial to fostering sustainable growth and stability.
