Author Topic: 2% SPREAD: BDC OPERATORS BLAME NON-COMPLIANCE ON CBN  (Read 1014 times)

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2% SPREAD: BDC OPERATORS BLAME NON-COMPLIANCE ON CBN
« on: February 25, 2009, 01:47:28 PM »
  2% spread: BDC operators blame non-compliance on CBN
By Sunday Ojeme


Some members of the Association of Bureau de Change Operators of Nigeria have said that their resolve to sell foreign currencies above the Central Bank of Nigeria?s recommended two per cent spread is due to the difficulties encountered while sourcing for forex.

Those who spoke to our correspondent on Tuesday complained that the inability of the CBN to meet dealers? demand in its twice-weekly Retail Dutch Auction System had compelled them to source forex elsewhere, which they also purchased at exorbitant cost.

According to one of the dealers, who spoke on the condition of anonymity, ?We initially resolved to abide by the CBN directive not to sell above the two per cent spread but since we can no longer rely on them (CBN) to meet our demand, we now look elsewhere to get forex to meet our customers? order. Since we do not buy everything from CBN, how do they expect us to exchange according to their rules when in fact we get this money at rates different from that which they give us.?

He also blamed the skyrocketing exchange rate on the closure of the inter-bank foreign exchange market, saying that it was wrong to have closed the alternative official window that provided competition in forex business.

The CBN has failed to meet the dollar demand by dealers in most of its auctions at the RDAS. This has compelled dealers to source forex from individuals and multinational firms that have continually intervened since the scarcity began.

The dealer revealed that the dollar was exchanged for N161 while the pound sterling sold at N232 on Tuesday- a deviation from the CBN?s spread of between N149.50 and N160.

Last Thursday, members of the ABCON pledged to comply with all the directives from the CBN.

The President of the association, Mr. Farouk Suleiman, said any BDC operator caught involved in any unwholesome practice or not totally complying with the directives of the CBN and the executive council in foreign exchange dealing would have its operating licence revoked immediately, and the promoters prosecuted accordingly.

Meanwhile, the CBN sold $341m on Monday at the rate of N145.90 to the dollar.

He said some people had explored the turbulence in the foreign exchange market for quick and selfish gains by engaging in speculation and arbitrage.

He said the movement of the BDC and open market exchange rate had not been in tandem with the official exchange rate.

According to him, ?Given that the spread allowed by the CBN for BDCs is two per cent, it is expected that the difference between the official exchange rate and the BDC/open market rate should not be more than N2.5 to N3. For example, with the official market at N145.9 per dollar, the BDC/open market rate should be about N150.28 per dollar. But this has not been the case. The exchange rate in the BDC/open market is presently trading between N158 to N162.?

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2% SPREAD: BDC OPERATORS BLAME NON-COMPLIANCE ON CBN
« on: February 25, 2009, 01:47:28 PM »

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