Pat Utomi (Professor of Political Economy)
There is no clear right or wrong answer in the clampdown on BDC operators. But there are consequences based on the established culture and character of the actors. For those who argue in favour of market-determined positions, they do not realise that you can actually implement a certain regime that has targeted rates. There are places where you had targeted exchange rates and they worked. But generally, and in majority of places, targeted exchange rates did not work.
The lesson we learnt in the 1970s and 1980s is that countries put up all kinds of price controls. In those years, countries like South Africa, Brazil and others had price controls. In Nigeria, we had an agency called the Products’ Pricing and Incomes Board. The board determined the prices of virtually everything sold and, therefore, controlled prices. It also had its problems.
In essence, in reporting, we cannot say the clampdown is good or bad. It is neither good nor bad. It is a nuance subject and people need to understand the dynamics underlying what we are going through.
The government is the biggest problem in managing the economy. The less you have of the government and allow the market, the better. What you now have is to use mechanisms to ensure that the weak in the economy are protected.
Aminu Gwadabe (President, Association of Bureau de Change Operators of Nigeria)
As far as we are concerned, this is not a wrong step. We need to make some clarifications. One, the clampdown is not against authorised operators, but against unauthorised operators.
We need to understand that Article 14 of the International Money Transfer recognises that every country has the right to regulate the price of the available exchange rate. Both the regulators and the BDC operators have been holding regular meetings. There is a collaboration between us.
What the security agencies are doing is not a clampdown. It is a state intervention and regulation needed at this critical economic stage. For the past two weeks, the operators and stakeholders have held meetings, and we are doing the needful.
We should ask ourselves; what is causing this dollar scarcity in the market? We all say lack of supply causes scarcity. I totally disagree with that. There are some activities that have no value in the economy that are affecting the rates. One of them is the illegal evacuation of huge amounts of money within our land and air routes. If this could be eliminated, it will be better for the naira. These illegalities are the economic saboteurs. We need to start talking to ourselves. We need to do less of nationalism and more of economic patriotism. As we do that, we must recognise that states have the power of regulation.
This lack of enforcement of regulations is even causing external pressure. Therefore, there is no clampdown. There has been an engagement between both parties to do it right. We need to get the facts right. There are regular meetings. We just have some recalcitrant (operators) in the market, and this is driving the market down. We do not accept that.
Prof. Ayo Olukotun (lecturer, Obafemi Awolowo University, Ile-Ife)
From the perspective of policy making, it is not right to have clampdowns. The alternative to clampdowns in a democracy is to embrace negotiations. No matter how well intentioned, clampdowns are not the way to go.
This should not get to a level where only the use of brute force can resolve economic problems. The objectives may be noble for the economy, but the means are wrong. We must be careful that personal interests are not at play and made to look like collective interests.
Bisi Sanda (Economic Expert, Ernst and Young)
Without mincing words, the management of any modern economy requires discipline. And every operator within the economy must be made to operate according to the rules.
For a nation like Nigeria, which is import-dependent, we have got to manage every player in a strictly monitored environment.
Given the fact that the governor of the CBN said they have allocated $11bn to BDCs in the last six years, it is critical that the BDCs operate by the rules. They (BDCs) are a major problem in the issues concerning our exchange rate today.
The media feels it is a clampdown, but in actual fact, it is not. The government that had been negligent is now enforcing the rules and that is not a clampdown. The question we should ask ourselves is; are these bureaux de change agents operating within the rules? They are not.
They take money from the CBN, which had given them the money at a particular exchange rate, they now sell far higher than what the government requires. This has been the bone of contention.
Every country manages its exchange rate. The United States of America still quarrels with China till today because China has refused to allow its currency to float. How can you allow your currency to float when you are still a struggling economy?
It is very critical that every player within the foreign exchange management plays by the rule and whoever does not want to must be given the maximum sanctions. That is not a clampdown. In fact, the government should sustain the tempo.
Kunle Ezun (Currency Analyst, Ecobank)
Two things are involved in this issue. One is the clampdown of BDC operators and the second is the sale of the dollar. The devaluation of the naira against the dollar is quite different from what the security agencies are doing to stop the exploitation by BDCs operators.
The BDC operators are expected to sell below N400 to a dollar. When they buy from the CBN, say at N350 and they sell at N360; if you put this into perspective, the naira should not be in a problem.
But now, fundamentally, the naira is under pressure. What is at play is a demand and supply dynamics. The economy is import-dependent and so, we require the US dollars to support the economy. Where do we get the USD? It is from oil.
In view of what is happening in the economy therefore, we have an inflation rate of 17.9 per cent, and we have an exchange rate which is unpredictable, the response we expect from the Foreign Direct Investments is also not there, and all of these are adding pressure to the naira.
At this point, Nigeria needs to drift away from import dependence, so that we can strengthen the naira. That is one of the effective ways out of this.
Ayodeji Ebo (Investment Banker/Economic Expert)
In the first place, the clampdown on bureaux de change operators is not the solution. The Central Bank of Nigeria, which is the regulator of the BDCs, should have more details of any atrocities being committed by the operators. Therefore, the CBN should be the one to play that regulatory role of ensuring that the BDC operators comply with regulations.
The clampdown by other agencies cannot be effective. But I do not think that clampdown would solve any problem. The regulator, which is the CBN, should come up with a policy that will help to close the gap in the unavailability of the dollar. As long as this attitude of BDCs doing round-tripping is not discouraged, we will continue to have different unethical practices in the currency market.
The steps to be taken by the CBN should include the need for transparency. They need to ensure transparency in the inter-bank market. Currently, most investors still think that there are some strong, invisible hands that are affecting the naira at the parallel market. The CBN should allow the forces of demand and supply to determine the price of the dollar. Though we may experience some sort of initial volatility in the market, it will stabilise. Currently, we have about seven types of market affected but the CBN needs to be fully in charge of monitoring the BDCs’ activities.
Punch
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