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Mention “Bureau de Change” to anyone in the street, and the person is likely to be totally bemused and nonchalant. You would be adding insult to injury if you were to press on with the mention of “forex” or “foreign exchange” or “dollars”. The BDCs are not your ordinary business serving ordinary people; they exist for the pleasure of the middle class and the superrich. They are the biblical moneychangers who once attracted the wrath of Jesus, .
It follows, logically, that prices of consumer items depend on the strength and ready availability of the dollar by comparison to the naira. The rate of exchange between the two currencies is the most closely watched in commerce and industry in this country. Any movement up or down has profound impact on the daily lives of every citizen. The BDCs are structured in such a way that they stand to make money whichever way the exchange rate goes.
Where big companies engage in cross-border transactions, which they must settle in dollars or some other hard currencies, that does not usually create problems, and where it does, the companies have their own means of resolving them through various financial instruments, currency “derivative” being one. The banks play a major role in mediating foreign exchange transactions between large companies. The difficulty is located at the lower end of forex, where most people are.
What subsequently happened was that the gap between the official and parallel market created room for currency arbitrage, which the BDCs were only too happy to milk dry. This column commented at the time: “The CBN’s show of force in the forex trade is unsustainable. The current bubble of a rise in the value of the naira will burst in the short to medium term.
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