Naira On Free Fall As BDCs Demand For BVN

Following the implementation of the presentation Bank Verification Number to consummate any foreign exchange transaction by banks and Bureau De Change (BDC) operators across the country, the value of the naira has begun a free fall at the parallel market.
The naira which sold at N227 to the dollar at the beginning of last week had lost value as customers and BDC operators tried to avoid being caught up by the various rules guiding against foreign exchange trading and money laundering.
The presentation of the BVN for the consummation of foreign exchange transactions according to the Central Bank of Nigeria (CBN) is to guide against money laundering, ensure transaparency and conserve the nation’s foreign exchange reserves.
The rule had taken effect on Monday last week November 1, 2015. Consequently the value of the naira had gained against the dollar at the parallel market whilst the official and interbank market remained relatively stable.
According to the Managing Director and Chief Executive of Fiancial Derivatives Company Linimted, Bismarck Rewane, “the requirement that BDCs should submit BVNs, sent the forex market into turmoil and the naira reeling to N233 to the dollar.”
Rewane speaking at an executive breakfast meeting at the Lagos Business School noted that BDC operators and their clients had become afraid of money laundering rules and indictments as the “new BVN rule roiled the markets.”
Traders at the market said the parallel market witnessed an upsurge in demand for foreign exchange as buyers bypassed the BDC operators due to tight regulation by the Central Bank of Nigeria. The apex bank had last weekend issued a statement mandating banks and licensed BDCs to demand the BVNs before selling foreign exchange to their customers.
“The adoption of BVN as a condition for the purchase of FOREX is expected to reduce the incidence of multiple purchases, round tripping and illicit transfer of funds.
“It facilitates enforcement of authorised limits of forex sales to end users, sanitise the retail segment of the market and engender policies that will facilitate better allocation of forex, based on genuine demands,” CBN said.
The naira remained stable at N197 at the CBN window while it sold at N199 at the interbank market. Meanwhile the external reserves continued to deplete, declining by 0.69 per cent in October to $30.19 billion. This provides an import cover of 4.89 months of goods and services for the country.