Speculators make huge profits as dollar scarcity persists

04 January 2015, Abuja – Currency dealers, including hawkers, are making fabulous profits from the sale of scarce foreign exchange, while the Central Bank of Nigeria watches helplessly, OYETUNJI ABIOYE writes

us dollarsDespite the scarcity of foreign exchange in the economy, billions of dollars are lying fallow with the Deposit Money Banks, Bureux De Change operators and currency hawkers waiting to be sold at parallel market rates to prospective buyers, it has been learnt.

Parts of the forex are currently being sold for between N260 and N263 per dollar to various categories of buyers, according to top bank officials and currency dealers.

For intending travellers, Personal Business Allowance and Business Travel Allowance are being sold at the parallel market rate between 260 and 263, instead of the official rate of 199 plus a 3.5 per cent commission prescribed by the Central Bank of Nigeria.

It was learnt that currency dealers, mainly commercial banks, the BDCs and foreign exchange hawkers, were having a field day making bumper profits from the sale of forex with the CBN watching helplessly.

“If you want $20m now at the rate of N263 to a dollar, I will get it for you from the bank,” a currency dealer told our correspondent in Lagos on Friday.

“The forex is there but it won’t go for anything less than the parallel market rate; banks have it, the BDCs also have it,” the dealer added.

Banks and the BDCs are meant to sell the BTA and the PTA to intending travellers abroad with valid documents at the official rate of 199 plus 3.5 per cent commission.

This is expected to bring the resale value or the ollar exchange rate to N205.9. Instead of this amount, prescribed by the CBN, the BDCs and banks are selling the PTA and the BTA to thousands of intending travellers at rates above N260.

The economy is left to suffer as the currency speculators battle for the control of the naira-dollar exchange rate with the central bank.

The CBN has come up with various measures aimed at curbing the activities of currency speculators but it appears the regulator is losing a lot of ground as the battle to save the naira gets bloodier by the day.

Already, there exists a huge gap between the naira-dollar exchange rate at the official market and the parallel market.

In December 2015, the naira hit 280 against the dollar at the parallel market. Compared with the 199 at the official market, the spread is N81. This represents a 40.7 per cent gap.

According to currency analysts and industry experts, the gap is strange and currency speculators or rent-seekers will spare nothing to make bumper profits from the unnecessarily huge gap.

This, according to currency experts, accounts mainly for the activities of speculators and rent-seekers, which they say have overwhelmed the CBN.

Across the world, the battle between the regulators and currency speculators is usually bloody with many casualties.

In Nigeria, the casualties appear to have transcended the limits as the economy and masses are now at the mercy of currency speculators.

Several intending travellers are left at the mercy of speculators as most of the banks now claim they don’t have the BTA and PTA.

However, the same bank officials refer customers to currency hawkers who sell at exorbitant parallel market rates.

The Chairman, Kakanfo Inn and Conference Centre, Dr. Lekan Are, recounted what he described as several horrible experiences in a number of banks.

For instance, he said he was at an Access Bank’s branch in Ring Road, Ibadan, to buy a PTA for a trip abroad. The official said she would sell to him at N257 to a dollar. He asked if that was the official rate and the Access Bank official replied that it was the amount they were selling it.

Are promptly called a top official of the CBN and asked if the official price for the PTA had become 257.

The CBN top executive was reportedly put on the telephone with the Access Bank official who started panicking.

She later sold $4,000 to Are at the official rate.

At another time, Are said he was to travel abroad and had approached the same bank for the PTA again. This time, the official on duty said the bank had run out of forex but that she could call a currency dealer ( hawker) who could sell to him.

Within minutes, she called the hawker who asked Are if he wanted up to $10,000 as he could sell any amount of forex.

Are said he told the mallam he wanted just the required $4,000 for his PTA. The hawker quoted the parallel market price and the Kakanfo Inn chairman wondered why it could be that high.

Are blamed the CBN for failing to clamp down on those involved in sharp practices at the BDCs and the banks, a development that had led to the continued fall in the naira value at the official market.

He wondered why the central bank had yet to withdraw the dealing licences of banks and the BDCs found to be engaging in sharp practices.

Are said, “There are lots of sharp practices going on. Banks bid for forex at the CBN window with the names of companies some of their directors had floated. They buy this at the official price and then turn around to start selling to innocent public at the huge parallel market rates, making a huge profit of N60 or N70 on each dollar. The same banks sell the dollars to mallams (currency hawkers) at alarming rates. They are reaping us off.

“How can the CBN give the dollar to people at N197 and they will sell it at N280 and there are no means of finding out and clamping down on them? The CBN is not performing its duties by allowing the banks and the BDCs to sell at ridiculous rates to the public. We need to get to the bottom of this as a country.

“We are giving forex to those who don’t need it, whereas people who need it to import raw materials and equipment for production and manufacturing purposes are not getting it. Why are we importing cornflakes when we have factories here? There are poultry farmers who can’t sell their eggs.”

But the Director, Corporate Communications, CBN, Mr. Ibrahim Mu’azu, said the central bank was ready to withdraw the licence of any BDC or bank found to be engaged in any illegal activity.

He said that banks and the BDCs were allowed to charge only 3.5 per cent commission on the amount bought.

Muazu said, “We monitor them. They render returns to us and through that, we can know. But don’t forget that they get dollar through autonomous source. And that depends on the amount they buy there. From the records made available to us, they only put the required commission as the margin on it. The situation is being monitored closely and we will never allow anybody to tamper with the nation’s external reserves.”

Joseph Olagbenro also had a nasty experience when he was to travel to Ukraine for further studies in early December and needed to buy $4,000 PTA.

According to him, as a fresh student, the university has a policy of not receiving bank transfers from Nigeria for the payment of tuition fee and other registration-related issues. The amount has to be paid in cash.

He reportedly approached all the Deposit Money Banks in the country for the PTA but they all claimed they did not have.

To compound Olagbenro’s problems, banks had started slashing the amount that naira debit cardholders could withdraw via Automated Teller Machines. Joseph was to use his debit card to withdraw in Ukraine but due to the cut in the daily withdrawals limit ATM to $100, he would need about two weeks or more to get the amount he needed. By this time, the deadline required for registration would have expired.

Economic and financial experts noted that the restriction/ban placed by banks on the use of naira debit cards abroad had worsened matters for many Nigerians.

The experts, however, advised the CBN to look at the possibility of devaluing the naira as a way out of the problem of forex scarcity said to be at the root of the ban on the cards’ usage overseas by the banks.

The Head, Investment and Research, Afrinvest West Africa, Mr. Ayodeji Ebo, said the CBN needed to reverse its administrative controls and restrictions, which had led to the scarcity of dollars.

He said the CBN would need to rather devalue the naira and let the economy bounce back by attracting foreign investors, while adding that the ban on payment cards’ usage abroad would inflict heavy pains on Nigerians overseas.

A renowned economist and Managing Director, Financial Derivatives Limited, Mr. Bismarck Rewane, also urged the CBN to make forex more readily available by devaluing the local currency.

He said, “The moves by the banks are obvious signs of rationing and restriction by the CBN. I am not surprised. The solution is to let the exchange rate change.

“How long can we hold it? The forex is not there. So, the only thing is to allow the exchange rate to go. I think a combination of devaluation of the naira and some restrictions will save the situation.”

 

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