Enforcing forex rules on BDCs with BVN

The newly initiated BVN-for-foreign exchange transactions’ rule seems to be the much-needed silver bullet to enthrone a regime of sanity, transparency and compliance to rules in the Bureaux De Change segment. CHIJIOKE NELSON writes on the initial results few days after enforcement.

The Central Bank of Nigeria (CBN), in just a few days to the end of the second deadline for registration in the Bank Verification Number (BVN) exercise, outlawed any foreign exchange (forex) transaction without valid BVN, effective from November 1.

The apex bank also read riot act specifically to Bureaux De Change (BDCs) operators, that at the same date, it would discontinue the sale of foreign exchange to any of them that did not avail it the BVN of all its directors.

Justifying the directive, it said that the directive has become necessary as the regulator continues in its efforts to stabilise the forex market, stem the rampant cases of forex leakages and illicit money transfers out of the country.

“All banks and licenced BDCs operating in Nigeria, as well as the general public are, therefore put on notice that with effect from November 1, 2015, all customers desiring to purchase forex through all available channels in Nigeria must provide their BVN, which shall be validated by the CBN authorised forex dealer through the Nigerian Interbank Settlement System platform before the transactions are consummated.

“Any authorised forex dealer that fails to provide the required information in its returns or provides a wrong BVN would be penalised and this may include the termination of the forex dealership authorization,” a circular signed the Director of Financial Policy and Regulation, CBN, Kevin Amugo, said.

But few days after the implementation of the use of BVN as a requisite for the purchase of foreign currency from BDCs, there seemed to be reasons to believe that the measure is hitting the right target.

While there may still be “smart” ones among them, the truth at the moment is that it is no longer the “business at ease” as the new rule has compelled the operators to comply with the sale of maximum amount to low forex end users for travel allowances, medicals, school fees, among other permissible.

There were indications over the weekend that most of the BDC operators were left with the large volume of unsold dollars, most of which they bought from CBN’s official window.

Perhaps not too impressed by the development, that has limited their excesses, the operators are blaming the BVN requirement as mainly responsible for their inability to sell, asserting that customers now shun the BDCs because of the requirement to patronise the parallel market, which pushed the rate at the segment to a range of N225-N230.

The apex bank’s spokesman, Alhaji Ibrahim Mu’azu, was quick to discountenance the assertion that introduction of the BVN, as a requirement for the sale of foreign exchange is responsible for the low patronage but described it “as a ploy to arm-twist or blackmail the CBN into reversing the directive on BVN requirement”.

Mu’azu further noted that BDCs were licensed to service the low-end users whose demand fall between $5000 and below, like Basic Travel Allowance (BTA) or Personal Travel Allowance (PTA) as the case may be, among others.

Before now, the BDC operators have engaged in bulk sales of foreign currency to those who carry them across the borders, without adequate and transparent rendition, contrary to retail business of selling not more than $5,000 for which they were licensed.

But the introduction of the BVN as a mandatory requirement for purchasing foreign currencies from the BDCs is currently checking that flagrant disobedience of regulations guiding of their operations.

Mu’azu noted that those with legitimate demand for foreign exchange need not fear as the BVN requirement is to facilitate the enforcement of authorised limits of sales and spread to end users and reduce the incidence of multiple purchases, round tripping and illicit transfer of funds.

But a new twist was in the past few days introduced to the issue, as speculations in some quarters said the disclosure of the BVN for forex transactions would compromise the person’s account details, with risks of fraudulent attack on the person’s valuables in banks.

CBN debunked the claims and allayed the fear of the customers in terms of compromising part of their banking information, stating that BVN is just a unique identification number, which is grossly inadequate to provide access to customers’ accounts, adding that it is neither a payment instrument nor an account number and therefore, could not be used to access any account by unauthorised users.

In practice, this same travelers who want to buy forex, submit more personal information like bank statements, international passport details and other personal information to the embassies, travel agents and airlines on demand without fear of compromise, much less the BVN, which is just a number that ordinarily the BDCs cannot use to access their personal information.

Of course, the current drop in forex demand in the BDC segment has laid credence to the assessed illegal bulk purchase, which could no longer hold, thereby reducing significantly, the number of BDCs’ who applied for forex from CBN within the period.

Meanwhile, initial reluctance and fears over disclosure implications of BVN number for forex transactions, facilitated naira losses to the dollar, as renewed pressure mounted on the parallel market.

At the parallel market, there was increased activity leading to N3 depreciation of the local unit from N227/$ on Monday to about N230/$ on Thursday last week.

However, dollar-naira exchange relationship remained majorly stable at the interbank market last week, gaining two kobo at N199.08/$ until Thursday when the Naira depreciated by two kobo to N199.10/$.

CBN reiterated that the implementation of the BVN as a condition for foreign exchange transactions is to reduce speculative attacks on the naira-dollar rate, curb illicit transfer of funds and ultimately stabilise the value of the currency by ensuring that genuine demand is met.

Meanwhile, the non-compliance to BVN registration and late submission of the number to facilitate linkage to other banks accounts where customers operate one or two more accounts continue to create transactional hitches as earlier warned by the regulator.