• BDCs on subsidy as four different rates emerge
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The Central Bank of Nigeria (CBN) may have discreetly abandoned the much-commended foreign exchange (FX) rate harmonisation less than a year after the policy direction was announced by the authority, market data have suggested.
Besides the black market rate, which is independent of the CBN operation, three distinct rates, previously submerged by the convergence policy, have resurfaced – BDC, NAFEM and Customs duty rates.At the weekend, the Nigerian Customs Service (NCS), which takes instruction from the CBN, relaxed the benchmark rate for duty clearance to N1,164/$, subsidising the exchange rate for importers by as much as over 10 per cent or N175 per dollar. Last week, trading at the Nigerian Autonomous Foreign Exchange Market (NAFEM), the anchor of the single-trading window, closed at N1339.23/$.
At the height of the FX crisis in March, the CBN and NCS snubbed dissent views and adopted the spot rate for import duty transactions, with the benchmark exceeding N1600/$ at some point.
Besides importers, bureau de change (BDC) operators have benefited from the bank’s ‘new’ generous FX subsidy. For the fourth time last week, the bank sold close to $16 million to its pre-qualified BDC at N1,021 per dollar.
At the time the monetary authority communicated with the Association of Bureaux de Change Operators of Nigeria (ABCON), the naira was trading above N1200/$ at both NAFEM and the parallel market.
Previously (since the comeback of BDC funding in February), the CBN had intervened in the retail market through the operators about four times, selling below the official prices each time.
Some experts suggested that the intervention in the market was a major reason the dollar had buckled at the black market in recent weeks, selling at a discount compared to the official rate.
Already, there are concerns that discriminatory rates would upset the market in the coming time even as sources confided in The Guardian yesterday that the international institutions, which commended the pro-market reform in the FX market, are raising eyebrows about the relapse to the old practice.
The CBN under Godwin Emefiele, for several years, had a running battle with the International Monetary Fund (IMF), the World Bank and other development partners over the adoption of anti-market FX management approaches.
The organisations blamed the draught in foreign exchange inflow on wide arbitrage between the official and black market rates, which hit 100 per cent at a critical stage of the crisis last year. The Fund pegs caps FX market arbitrage at five per cent.
But less than a month after Emefiele was removed, the CBN under Folashodun Shonubi, pulled the plug off the overvalued naira and adopted the neoclassical recommendation (rate convergence and liberalisation).
Subsequently, the naira plunged at both official and parallel markets but the Central Bank held on to its gun justifying the adoption of market reforms and rate convergence around NAFEM, which was created as the single-window platform.