October 20, 2018

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The CBN got it right in stopping dollar sales to BDCs – Tunde Gboyega

The CBN got it right in stopping dollar sales to BDCs – Tunde Gboyega

DOLLAR RISES TO OVER N300/$1… AS CBN STOPS SALES TO Bureau De Changes (BDC’s)
I’m not usually one to say “I Told You So” … but I’ve been saying it (…with bated breath since last year)… N300/$1 here we come!

Now I look back with a tinge of regret… everything is suddenly more expensive… that $200 pair of shoes suddenly costs N60,000 (it’s gone up by 36%) from when it was N44,000 six weeks ago   on Black Friday (Nov 27, 2015).

Anyway CBN’s reason for the stoppage appears to make sense – Let’s do a few calculations:

Sabi Business 1

  • No of BDC’s licensed – 2,786
  • Weekly sales to BDC’s – $60,000
  • Weekly dollar sales to BDC’s = 2,786 * 60,000 = $167,160,000
  • No. of weeks in a year = 52.
  • Annual sales to BDC’s = 52 * 167,160,000 = $8,692,320,000
  • CBN (Nigeria’s) Foreign Reserves = 28,673,947,852 (as at Jan 14, 2016)
  • This means based on BDC sales alone = 28,673,947,852 / 8,692,320,000 = 3.3 years your reserves are empty!!!
  • Even when weekly sales were reduced to $10,000 – this would still amount to $1.449 Billion yearly (i.e. 10,000 * 2,786*52) – still a lot of money.

Now CBN’s basis for selling to BDC’s is so that they can sell to retail customers – PTA (personal travel allowance) = $4000 / quarter and BTA (business travel allowance) = $5000 / quarter.

Remember that this is supposed to be done at the official rate of N200/$1. I could be wrong, but I doubt the BDC’s sell at the CBN rate. Yours truly (this author) has never ever been able to buy at this rate – meaning I still have to buy my PTA directly from the bank.
This means BDC’s could potentially make a killing weekly e.g. using N260/$1 as an example
Spread = N(260 – 200) * 60,000 = N3,600,000 or using $10,000 = (260 – 200) * 10,000 = N600,000 weekly
No wonder CBN receives 150 new applications for BDC licenses weekly…
In the same vein, CBN has also permitted banks to start accepting dollar deposits; this I believe in combination with no sales to BDC’s has fueled the current speculative demand for dollars that we’ve seen and the subsequent rise in the parallel exchange rate.
I however believe at some point the dollar once this initial gra gra subsides… water (or in this case… dollar) will find its level.

DANGOTE TO BUILD FERTILIZER & PETROCHEMICAL PLANT / REFINERY – AND GENERATE $6BILLION YEARLY
Dangote Industries Limited has announced plans to build a fertilizer and petrochemical plant/refinery. The fertilizer plant should come on stream next year, while the plant and refinery should be completed by 2018. Nigeria is currently meeting less than 20% of its daily PMS consumption through its local refineries. The refinery will improve local production, reduce import dependency and also produce for export. It is expected to generate about $6 billion in revenues, a positive development considering we still inefficiently use our foreign reserves to import oil. This could ease pressure on Nigeria’s foreign exchange earnings as it would sell its foreign exchange earnings through the CBN.
Now if only they can finish construction of the complex fast and Crude Oil price recovers to $100/barrel… (I’ve been told to pour water on my face… and stop dreaming!!).
SWITZERLAND TO RETURN $300 MILLION IN LOOTED FUNDS TO NIGERIA
Negotiations are ongoing, but Switzerland has promised to return $300m in looted funds – now if we remember that we intend to finance N350 billion ($1.75Billion) out of our budget deficit of N2.22 trillion with repatriated funds – receiving $300m is a good start!
Only $1.45billion to go!!
MISSING BUDGET DOCUMENTS – NO CAUSE FOR ALARM AS ITS DOCUMENTS AND NOT MONEY THAT WAS MISSING!!
Only in Nigeria do we hear that the budget documents signed by the President and submitted to the National Assembly were purportedly missing (… lost and found…).
Nigerians normally would have reacted with shock and awe at this development – but our reactions were lukewarm for one reason… it was documents that went missing (albeit temporarily)– not the budgeted money.
As long as the budgeted money is there and not missing… in the immortal words of a former president: “We Dey Kampe”

 

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