Have you ever wondered where Bureau De Change operators in Nigeria obtain the large volumes of foreign currency they handle and sell to their customers every day?
At inception, their primary source of foreign currency was the Central Bank of Nigeria. However, today they have more than 10 sources from which they acquire forex. Their strategic moves in FX market have made them stronger.
Table of Contents
Excess Estacodes
Nigerian politicians and senior civil servants collect estacodes to cover travel expenses. And most times, the foreign currencies are in excess so they come back to sell the excess to BDC operators.
For instance, a typical Nigerian politician would apply for $50, 000 USD as estacodes for travel expenses that shouldn’t be more than $20,000.
The excess of the $30,000 serves the parallel market. The BDC buy from them and they prefer to sell to the street operators because they buy at a higher value than the commercial banks.
Allocation from the Central Bank of Nigeria
Before the CBN terminated the supplies of forex to Bureau De Change in Nigeria, the apex bank was one of the major sources of funds to BDCs. It was selling $20,000 each to over 5000 BDCs per week.
Financially, that amount translates to about $110,000,000 in five days and about $5.72 billion within a year.
To have access to the CBN supplies, your company must satisfy the statutory laws and be ready to abide by the rules.
Not only that, you have to make certain deposits to the apex bank’s operation bank account. It seems that the source has been blocked, but the association of BDCs says they will be engaging the apex bank.
At the time of publication, operators remained unperturbed as they continued to source for forex from new and existing customers.
Purchase From Customers
From the CBN’s action, operators already have a flourishing source of supply which come in from their existing customers. The operators have a way of making a customer come back or refer new customers to them.
One of the agents said, “We get dollars from customers more than what CBN give to us,” The Nation quoted him as saying in a report.
Google Publishers
A Nigerian blogger could earn as much as $5,000 USD per month or more, depending on the popularity and authority of his blog in a niche.
Bloggers who use Adsense, a programme which was created by Google through which blogs and website owners in the Google Network of content sites serve text, images, video, or interactive media advertisements to a targeted audience.
This set of bloggers is called Google publishers. They earn in USD or Pounds 23 every month, if they meet the payment threshold. These people prefer to sell their foreign currencies to BDC operators.
Interestingly, most of them already have a permanent buyer they sell to when their earnings drop in their domiciliary account.
From Remittances
The CBN has repeatedly promulgated policies aimed at effectively utilizing foreign remittances to mitigate potential scarcity in the FX market. One such policy is the Naira4Dollar scheme.
How it works: the CBN offers as a reward to anyone who remits dollars via banks N5 for every $1 remitted.
It was one of the ways to remove the middlemen who buy at CBN rate and sell at black market rate.
But foreign remittance still remains one of the sources of forex for the BDC operators. It’s a huge channel for them till date.
Even as the apex bank banned International Money Transfer Operators (IMTOs) from releasing dollars or other foreign currencies to recipients in a latest FX policy by the CBN, BDCs are now using P2P to get FX from remittances.
Buy From Travelers
Despite the cashless policy of the apex bank, Nigerians come into the country with large foreign cash since they know that depositing huge amount into their account might raise suspicion from banks and the anti-graft agency.
Not just that, bank exchange rates aren’t always favourable, so they prefer to patronise the BDC operators.
In fact, most of them communicate their buyer in Nigeria before departure from their destination.
So, cash from travellers coming into Nigeria is another source. Have you been to the Murtala Muhammed International Airport or Nnamdi Azikwer International Airport before? You can only know how foreign currencies flow in through this channel.
International Oil Companies
Recently, a BDC operator in Lagos, Nigeria’s commercial city, revealed that international oil companies patronise them to get good exchange than what the banks give them.
One can’t ultimately blame the operators, CBN made the market open to indirectly provide jobs for some people but failed to put ineffective mechanisms to monitor excesses.
Nigerians Who Earn Salary In USD
Nigerian App developers earn huge sums in foreign currencies from across the World. These people patronise parallel market operators than the official channels.
One of them told The Nation recently that:
“We always have many walk-in-customers bringing dollars. There are many Nigerians that earn dollars, especially professionals who carry out services for foreign companies.
“We also have Nigerians working for foreign companies whose salaries are in dollars. They always approach us to change their dollars into naira.”
Domiciliary Account Holders
Just like the Google publishers prefer to sell their earnings to BDC operators, some Nigerians who also earn in USD prefer to do the same.
“There are also many people with domiciliary accounts who also come to us to change money when they need for naira.”
From International Professionals
Many Nigerians who offer services on international markets are paid in foreign currency. In fact there are blogging gigs on LinkedIn that would pay Nigerian content writers in dollars. These people are assets to the BDC operators.
Takeaway:
BDC operators are now a force in Nigeria’s foreign exchange market
Stoppage of sales of forex to them isn’t a ban, in fact CBN allows them to privately source foreign exchange.
Majority of Nigerians prefer to change their dollars at BDC shops than the banks because of the disparity in the official and the parallel market.