Nigeria bank chiefs see increase dollar supply to BDCs as positive move

Nigeria this week raised weekly dollar allocation to Bureau De Change (BDC) operators to $50,000 from $30,000 in a bid to support the local currency and ensure liquidity in the parallel market. This measure is seen by banking operators as a great move to reduce pressure on the local currency and boost supply to forex end users.

"The increase was necessary based on the present prevailing circumstances where the available forex in the market was not sufficient to meet the needs of Nigerians," said Kennedy Uzoka, Group Managing Director (GMD) United Bank for Africa (UBA).
Uzoka said before the increase was made, there were lots of consultations by the Central Bank of Nigeria (CBN) and the Bankers' Committee based on the feedback received from the market which necessitated the increase.
"We believe that this development will ensure that there is more cash available to the BDCs and increase the supply. And this will help to drive down the price," he added.
The Abuja Chamber of Commerce and Industry (ACCI) also commended the apex bank for increasing weekly dollar supply to Bureau De Change (BDC) to 50,000 dollars.
ACCI President, Tony Ejinkeonye, said the increase in the dollar allocation would improve the supply of foreign exchange in the nation's financial system.
"This is a welcome development because the issue of scarcity of foreign exchange still lingers after the flexible foreign exchange policy was introduced." he said.
According to him, BDCs play important role in the financial system because they provide foreign exchange to operators of Small and Medium Enterprises (SMEs) and business travelers.
He said the BDCs also provide foreign exchange to people travelling abroad for urgent medical services, those going on vacation and people going to school abroad.
Ejinkeonye expressed the hope that increasing supply of foreign exchange to BDCs may reduce the current pressure in the foreign exchange market.
On his part, Henry Boyo, an economist, urged the apex bank to control the rising macro-economic indices, to close the wide gap between the official and parallel markets' exchange rates.
He said the CBN was trying in controlling the effects of rising inflation by increasing the Monetary Policy Rate (MPR) to reduce the level of liquidity in the system and stem the negative effects on the foreign exchange market.
He said inflation at double-digit inflation posed negative implications to the nation's diversification agenda.
According to Boyo, the presence of a high inflation rate, cost of funds, monetary policy rate, as well as the exchange rate in the economy are antagonist to the development of any nation.
He said those factors needed to be tackled and also for the authorities to control the forex sources in the country.
The apex bank on June 16 released guidelines for the flexible foreign exchange policy.
A flexible exchange rate system is a monetary system that allows the exchange rate to be determined by the forces of supply and demand. Enditem
*Copyright  Xinhua News Agency