Foreign Exchange Documentation Process Cumbersome – FDC

Bismark Rewane

FINANCIAL  Derivatives Company Limited (FDC) has described the process required by commercial banks for the sale of foreign exchange as cumbersome and also noted that it would be a challenge to the general public.

Analysts at FDC, headed by Mr Bismarck Rewane, noted in a report that the CBN’s decision on BDCs saw the parallel market exchange rate jump to N525/$ the following day as the market tried to digest the implications of CBN’s decision on businesses.

“Since then, the naira has steadily appreciated, to N508/$. Other market rates have also appreciated. Analysts at FDC also said that the IATA rate moved from N460/$ to N412-413.

“Since the CBN is expected to shift the forex supply previously sold to BDCs to the banks, we expect to see an increase in volume and turnover in the banking segment of the forex market, making dollar sales more accessible to the public. This will lead to an appreciation of the exchange rate for invisibles such as PTA (personal travel allowance), BTA (business travel allowance), tuition, etc.”

They also noted that the parallel market rate depreciation would temporarily lead to widening of the forex market premium.

Although, as the market adjusts to the recent forex ban, the increase in the parallel market premium will gradually come to an end which will lead to a convergence of rates around the I&E FX window, analysts added.

The FDC also revealed that commercial banks would benefit from the increased supply of forex from the CBN and also record an increase in transactions.

Prime Business Africa had reported last week that CBN directed all commercial banks to set up forex teller points in their banks after the apex bank announced it has halted sales of forex to BDCs operators and also stopped issuing licenses

Analysts in FDC noted that the cumbersome process required by banks will remain a challenge for the public.

“However, the cumbersome documentation process required by banks will remain a challenge for the public” they said.

They also hoped that the market will adjust to the new norm without BDCs operators, while the BDCs operators will become extinct in the new forex era or be forced to survive independently.

In response to CBN’s decision last week, the BDCs said that they were going to dialogue with the CBN, noting however, that they can source for forex independently.