WHILE the efforts by the Federal Government to strengthen the naira continue, indications have emerged that the Bureaux De Change (BDCs) may not have been the only source of leakages creating the weakness of the currency against its foreign counterparts.
The Guardian investigation revealed there is an estimated one million street hawkers of foreign currencies, who constitute what is popularly known as ‘black market’ and are enriching themselves with the illegal business which they operate with the foreign currencies, the sources of which are unverifiable.
The deposit money banks have also been fingered in the shady deals that have predisposed the local unit to ridicule- officially labeled ‘round-tripping’, but now taking the form of alleged connivance with the street hawkers of currencies.
The evidence is based on free access to banks’ bulk rooms by the currency hawkers, who usually hang around the branches.
Investigation revealed the anomaly in one of the branches of a major bank in the country, which prompted a further investigation into the matter. The situation was also observed in two other big banks, especially those with branches around the areas where the currency hawkers operate. The reality was confirmed when The Guardian observed a suspected currency hawker who walked into the bank’s bulk room and collected a bundle of N500 notes with just a ‘finger gesture.’
When he came out, he asked the reporter if he had come to sell dollars, by saying: “Oga, dollars?”
A BDC operator who did not want his name mentioned said banks, before the advent of the Retail Dutch Auction System (rDAS), were openly selling to the street hawkers and even to BDCs.
Through the Wholesale Dutch Auction System (wDAS), banks would amass huge foreign exchange from the official window on the claims that their customers demanded the quantity, which they would eventually divert to other purposes.
The wDAS is where CBN receives bids from authorised dealers for the purchase of foreign exchange on behalf of BDC’s and other end users. The total demand needs not match the total request.
For example, an authorised dealer can purchase $2 million from the CBN during an auction even though it only had requests of $1 million from its BDC’s and other end users. However, rDAS is a direct sale of foreign exchange by CBN through the banks to the end users of the foreign exchange based solely on actual demand of foreign exchange by the end users.
“They were curtailed when CBN moved to rDAS. One single bank can sell up to $18 million a day. Now, the street hawkers are not just around the banks, the environs have become their offices. What are they staying there for or what do you think is their relationship with banks and their officials?
“There are over 300,000 currency hawkers in Lagos alone. In the northern part of the country, it is the usual business.
“In Akowonjo in Lagos and Sheraton and NICON in Abuja, if you suddenly run into them, it will look like a procession or political rally. All of them are making a living out of the illegality,” the source said.
The President of the Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe, told The Guardian that while CBN may be ‘blindly’ trusting the banks, BDCs know well that they are contributors to the foreign exchange imbroglio.
According to him, banks are the major stakeholders in the foreign exchange market and closest to the parallel market operators, which is evident by their usual thoroughfare banks’ premises.
“The parallel market alone has over one million operators and about 100,000 of them are richer than all the licenced BDCs together. These operators source dollars from our porous borders, proceeds of human trafficking and oil theft. It is at the parallel market these illicit dollar flows are exchanged for the naira.”
Gwadabe believes that naira has continued to depreciate overtime due to leakages in the system, which may not stop until they are identified and blocked, because the attention has been on the speculation and hoarding.
“The demand in the parallel market is twice the demand in the official market. And what is fuelling it? There are lots of Chinese businesses in the country. They import their foods directly into the country, and retail them.
“They have a lot of naira with them and are ready to exchange the dollar at whatever price to repatriate their profit to their country. It is in the parallel market that they do that, and they are not alone,” Gwadabe said.
But another source close to the foreign exchange treasury of a financial institution told The Guardian that before the change to rDAS by CBN under Godwin Emefiele, banks were doing business with the street hawkers.
“It somehow reduced, with more measures introduced. But I have to tell you that though it is pretty hard now because of the Bank Verification Number tag to every foreign exchange transaction, there might still be a way for those who are interested.
‘‘There are companies that can be used to disburse foreign exchange in the name of importation. Of course, it is about interest, what either the bank or the promoter can get out of it,” the source said.