Wednesday, 5 February 2014

Banks Exploit Loophole in Forex Market

301112N.Euro,--Dollar-notes.jpg - 301112N.Euro,--Dollar-notes.jpgAmidst the spirited attempts of the Central Bank of Nigeria (CBN) to halt naira depreciation and bridge the widening gap between the official and parallel market rates, indications emerged at the weekend that some banks are already taking advantage of the inadequate supply of foreign exchange, especially the dollar, and are actually profiting from the unpleasant situation.
Apparently worried by the resurgence of parallel market activities, where a dollar was sold at N172 last Friday, as against the official rate of N160.30, the CBN last week promised to rise to the occasion by adjusting the prevailing policies in order to safeguard the economy in weeks ahead.
However, a wide spectrum of foreign exchange marketers who spoke with THISDAY at the weekend listed factors responsible for the growing disparity in the exchange rates to include deliberate hoarding of dollars by banks, who in most cases, compel desperate forex users to do the transactions through domiciliary accounts.

A foreign exchange dealer, who is also managing director of a bureau de change, disclosed that “The banks apart from frustrating the efforts of the CBN on forex transactions, they also flout them by either refusing to sell up to the required standard ($250,000) to BDCs, or by making it mandatory for the operators to purchase through domiciliary accounts to attract extra charges. This then exceeds the one percent maximum margin required by CBN.”
Under the existing policy, CBN sells $50,000 to each of the 3,500 licensed bureau de change nationwide every week, while banks are allowed to sell a maximum of $250,000 to BDC weekly.
But sources alleged that banks are capitalising on the supply shortage to charge beyond the one percent required by law, and subjecting BDC operators and other end-users to purchase the forex through domiciliary accounts for extra charges.
Tracing the current discrepancies on the part of banks to last year, a source said that banks were buying dollar at N157 from the CBN and sold to the BDCs at N167.50, a development that gave them a wide margin. The CBN was however said to have addressed this last year, when it insisted that no bank should sell their money above one percent margin.
BDCs’ sources however said the immediate response of banks to the apex bank’s intervention was to stop selling dollars openly.

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