BDCs Urge CBN to Raise Dollar Supply-MARKET INDICATOR:

Bureaux De Change (BDC) operators in the country have called on the Central Bank of Nigeria (CBN) to increase the weekly sale of foreign exchange (forex) to the sub-sector.

The forex dealers also asked the central bank to extend its occasional intervention in the forex market to their sector, so as to reduce demand pressure at the retail end of the market.

Speaking under the aegis of Association of Bureaux De Change Operators of Nigeria (ABCON), the BDCs lamented that while over 2000 operators have laboured to comply with the N35 million mandatory caution deposits, the $15,000 weekly sale to each BDCs by the CBN is inadequate to cover operating costs.

“Considering the difficulties that BDCs are currently facing, due to the volume of the weekly sales granted to BDCs as against the associated costs in the business, we are strongly suggesting that the CBN should consider increasing the weekly sales to BDCs from $15,000 to $50,000, the Association said in an appeal letter to the CBN Governor,” a statement from the association explained.

Stressing the need for the extension of CBN forex intervention to BDCs, the association noted that given the ever increasing demand of the greenback as against the rigidity of the weekly official sales to BDCs, “we have noted that a good number of our members hardly meet up their demands from end-users.”

It added: “Now, to assist in achieving the aim of exchange rate stability in the events of increase in demand of dollar and static sales of $15,000 to a BDC, we are suggesting that, for now, the central bank should consider granting our sub- sector periodic sales intervention as it does to Banks.

“For instance, on 24th September, 2014 by Retail Dutch Auction System, the CBN sold a total of N350 million to banks, while on 29th September, 2014 and 8th October, 2014, total of N500 million and N400 million respectively were also sold to banks making a sum of $1.250 billion within a period of 13 days.

“Statistically, the sum of $15,000.00 is sold to a BDC per week, giving a total of about $37,500,000-00 to BDCs per a week.”
The association also appealed to the central bank to reduce the mandatory caution deposit to N15 million from N35 million, to free up cash for BDCs to meet day-to-day operations.

It noted that after the expiration of the deadline for the payment of the fee of N35million, it noticed that a good number of BDCs could no longer conveniently carry out their weekly trading due to lack of cash.
Furthermore, it pointed out that in order to avoid the possibility of such BDCs closing shop even after having made the effort to pay their caution fees, the CBN should consider the possibility of reviewing the caution fee from N35million to N15million in order to financially empower BDCs to carry on their weekly trading.

Noting that many BDCs are yet to be refunded the earlier mandatory caution deposits of $20,000 and N500, 000, imposed before the N35 million introduced in June, ABCON appealed to the CBN Governor to intervene for the prompt release of this fund to the owner BDCs.

Meanwhile, in a bid to calm the recent volatility at the forex market, the CBN last week increased its bi-weekly intervention as it sold $700 million, compared to the $400 million sold the preceding week.
The CBN sold $350 million last Monday at the marginal rate of 155.75/$1 while it increased the marginal rate by one kobo to N155.76/$1 last Wednesday when it sold another $350 million.

Week-on-week, the naira closed at N165.35/$1 and N169.50/$1 at the Interbank and BDC segments respectively last Friday, a 65kobo and 50kobo depreciation respectively.

Analysts at Afrinvest Securities anticipate that the nation’s currency would continue to experience pressure at all segments of the market this week against the backdrop of heightened socio-political risk and broader macroeconomic concerns.