Based on recent CBN forex trading ban on Bureau de change, BDCs, here are 10 things to note if you’re planning to buy dollars from the banks.
The CBN announced the ban on Wednesday 28 July. Consequently, Naira fell against the US dollar immediately after the announcement, according to The Punch newspaper.
Expectedly, Naira’s fall against major currencies continues to date as the BDC alternative forex window shut down.
However, the Central Bank followed up with a circular asking deposit money banks to quickly set up forex teller windows.
This is to ease the pressure as more bank branches open teller windows to serve customers at designated branches.
CBN instructions contain the following information for those planning to approach the banks for forex transactions.
10 things to note
WHICH BANKS CAN SELL FOREX?
- Bureaux De Change will no longer buy or sell sell foreign exchange to customers.
- Therefore, only commercial banks (Deposit Money Banks) will henceforth source forex from the CBN to sell to retail customers.
- However, policy doesn’t affect the parallel (black) market, which now plays critical role supplying forex to SME travellers and businesses.
WHO WILL BE SERVED BY THE DMBs?
- Only those travelling for leisure and for business will be attended to.
- You can also approach the banks for forex to pay school fees or hospital bills abroad.
- SMEs with legitimate business transactions are to be assisted too by the banks.
WILL DMBs PAY OUT CASH OR DO ELECTRONIC TRANSFERS ONLY?
- DMBs are authorised to pay either cash or transfer forex electronically to customers who meet the requirements.
WHAT DO YOU NEED TO APPROACH THE BANKS TO APPLY FOR FOREX?
- The CBN emphasizes proper documentation for access to forex from DMBs. We imagine that – for those seeking to obtain Personal or Business Travel Allowance – document that prove one has been granted access to visit a foreign country (Visa) and travel ticket would suffice.
WHAT’S THE GUARANTEE THAT BANKS WON’T FRUSTRATE PEOPLE OR HOARD THE MONEY?
- CBN says it will police the new system to ensure that they do not frustrate the policy. Banks will be penalised for “undue delays, rationing, (and) diversion of forex.”
- In addition, CBN also set up a toll-free number for forex seekers to report unresolved issues with their DMBs.
Implications of CBN ban on BDCs
It remains to be seen how effective this policy reversal will turn out to be. Yesterday, Friday 30 July, Naira traded N520 to the dollar in the parallel market. Meanwhile, it sold for around N460 in the official window. The huge margin of N60 between the two markets presents a great temptation for greedy banks to go into roundtripping. Top government officials have in the past given in to the temptation.
The biggest worry is that retail traders and small-scale importers now depend on the parallel market for their forex needs. Most will not be able to provide adequate documentation to buy forex at the official window. The implication, of course, is that costs of imported goods are likely to continue to rise as Naira weakens.