Financial experts have said that the new directive to stop direct sale of foreign currencies by the Central Bank of Nigeria, CBN, to bureau-de-change operators would check illegal activities in the market.
They explained that the decision would stabilise the foreign exchange market and wrest it from the control of those with untoward intentions.
The country’s external reserves had dropped to $28.19 billion on January 8, from $29.07 billion at the end of last year, a reduction of $88 million in the first week of 2016.
Head, Research and Investment Advisory at Sterling Capital, Sewa Wusu, said the CBN’s decision was part of measures to reduce the pressure on the nation’s foreign reserves.
Wusu noted that although the new decision was a big task, the overall health of the economy was important.
According to him, the country could not afford to remain in the current situation, stressing that the directive on deposit of dollars into domiciliary accounts would increase the level of dollar deposits in banks.
He said the directive would also put an end to round-tripping and rent seeking as dollar demand from the system would reduce, adding that the liberalisation of the interbank market was necessary to stabilise the foreign exchange market.
“The CBN, however, has to rationalise foreign exchange to ensure that the reserves do not continue to deplete further due to decline in revenue earnings from crude oil. Although, there might be slight pressure on the parallel market, but this will reduce later as the market stabilises. We are moving towards a regime of flexibility where demand and supply would determine the value of the naira,” he said.
A former President of the Association of National Accountants of Nigeria, ANAN, Samuel Nzekwe, said the decision was long overdue.
Nzekwe pointed out that BDCs all over the world were not sourcing their foreign exchange from their respective central banks.
He added that BDCs in many countries were only allowed to attend to foreign exchange demands of light travelers, which they got from visitors into the country.
Nzekwe recalled that some Nigerians were jailed in the past for patronising BDCs before their activities were legalised.
A currency analyst at EcoBank Nigeria, Kunle Ezun, said the action of the CBN was aimed at reducing the pressure on the naira at the foreign exchange market.
“The naira has depreciated steadily at the parallel market in the last two months. It weakened to a new low level of N282 to the dollar on January 11 due to the new directive of the CBN on foreign exchange sales to the BDC.
“By removing the restriction on foreign currency and cash deposits, the CBN has provided a platform for Deposit Money Banks, DMBs, to re-engage forex customers. The aim of mopping up foreign currency cash outside the banking system is for effective monetary policy operations”.
Ezun, however, said the foreign exchange inflow remains a big issue that the CBN needs to address in order to consolidate its efforts on foreign exchange management.
“The BDC market represents a small component of the forex market, but has high distribution network that cannot be wished away by the regulator. Instead of an outright stoppage of forex sale, perhaps the CBN could have identified the erring BDCs for appropriate sanctions, while others are monitored real-time for compliance with the extant law.’’
The analyst, however, added that the lack of comment on telegraphic transfers, foreign cash notes and the two way quote market could limit the positive impact of the new policies.

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