Naira drops as BVN paralyses Forex market

Activities at the retail segment of the official
foreign exchange market were grounded, yesterday, as
end users avoided bureaux de change (BDCs), to
avoid submitting their Biometric Verification Number
(BVN) for foreign exchange transactions.
This, however, resulted in sharp increase in demand
for dollars at the black market, prompting the naira to
depreciate to N230 per dollar from N225.
Recall that the Central Bank of Nigeria (CBN) made
the BVN a criteria for sale and purchase of foreign
exchange by banks and bureaux de change (BDCs)
effective November 1.
Investigation, however, revealed that
instead of foreign exchange end users submitting
their BVN to BDCs as mandated by the CBN, most of
them moved to the black market for their foreign
exchange needs. This in turn increased demand in the
market, prompting the parallel market exchange rate
to rise to N230 per dollar from N225 at the close of
business on Tuesday.
Mr Harrison Owoh, Chief Executive Officer, H.J Trust BDC
said that “most of the customers were not willing to
submit their BVN due to fear of what it might be used
for. This has slowed down sales of forex by BDCs
because we can’t sell without obtaining the BVN.”
An Abuja-based BDC manager, who spoke to
Vanguard on condition of anonymity said that the
problem was severe in Abuja, with BDCs having
difficulty selling the dollars purchased from the CBN,
last week.
“As I am talking to you, most BDCs in Abuja may not
take dollars from CBN today (yesterday) because we
have not sold the ones we bought last week. The
customers do not want to submit their BVN for
security reasons. They are patronising the black
market, that is why the rate has gone up sharply, and
I can tell you, the rate might rise higher if the
situation persists.”
President of Association of Bureaux De Change
Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe,
however, blamed the situation on lack of adequate
awareness on the part of the CBN before
implementing the policy. He said that while ABCON,
as a partner in progress with the CBN supports the
use of BVN as criterion for foreign exchange
transactions, the association had, however, called the
attention of the apex bank to the need to delay
implementation to allow massive publicity to create
awareness among the populace.
“We had predicted what is happening now, that in the
absence of adequate awareness, patronage will shift
to the black market, leading to depreciation of the
Naira in the market”, he said.
Submitting BVN not security threat—CBN
Director, Corporate Communications Department of
CBN, Alhaji Ibrahim Muazu wondered why anybody
should be afraid of submitting BVN for transactions,
adding that there was no threat in giving BVN for
foreign exchange transactions.
According to him: “This probably has to do with
people with illicit flows, and not for fear of the BVN
itself. And for people with illicit flows, they are
avoiding documentation, the way they avoid the
banks.
“To us, if not for the likely impact on the black
market, it is a good development because it means
the foreign exchange market is now demand driven.
For example, if you go to the banks for ‘Form A’
foreign exchange transactions, it requires more than
the BVN.
Submitting BVN for transactions is not a security
threat. The BDCs cannot access the account details of
their customers; they would just have the BVN for
reporting purposes.
“The BVN is just an identity; the BDC cannot see your
account details. It is just like asking you to submit
your passport photograph. And the purpose is to
make sure that people don’t buy foreign exchange
above the limit allowed by the law.
There is a limit of $4,000 per individual per quarter. If
one person buys $4,000 from one BDC, and another
$4,000 from another BDC, there is no way anybody
can verify it is the same person. All these things are
supposed to be controlled by the BVN. All we want to
clarify is that there is no threat in giving your BVN, it
is an identity, in as much as you can give your
passport photograph or even utility bills, as required
for operation of dormant account.
“It is unfortunate if they are going to the black market
and the black market does not have enough supply;
but for us if they don’t buy from the CBN, if the CBN
dollar is not sold, it would come back to us or there
would be no demand for dollars next week, and this
means we are conserving reserves. The only problem
is the funding source for the black market will be
limited and the price is high. But if I can give my BVN
and buy dollars, maybe at N200, why should I go to
black market and buy at N250? So the genuineness of
the transaction is clear.”
Background to policy
The policy of making BVN criterion for foreign
exchange transactions should have taken off August
15,2015 but was suspended by the CBN following
criticism and warnings on the likely impact on the
exchange rate of the Naira, and also to allow the
Nigeria Interbank Settlement System (NIBSS) provide
multiple channels for BDCs to verify BVN submitted
by foreign exchange end-users.
The purpose of the policy, according to a CBN
circular issued on October 20, was to stabilize the
forex market, stem the rampant cases of forex
leakages and illicit money transfers from Nigeria.
The CBN circular
The circular stated: “All banks and licensed 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.
“For the avoidance of doubt, the CBN shall from
November 1, 2015, discontinue sale of forex to the
BDCs that had not availed it the BVN of all its
directors. 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
authorisation.”
Consequently, on Monday, October 26, NIBSS unveiled
a USSD and internet channel for verification of BVN.
According to Mr. Oluseyi Adenmosun, the BVN
Project Coordinator for NIBSS, BDC operators or
anybody can dial the short code *565*1# on their
phones from any part of the world for the validation.
The USSD code when dialed will pop up a message
asking for the BVN and the date of birth of the BVN
holder to confirm the genuineness of the BVN. The
BDC operators also have the option of using the
NIBSS website portal for the validation. The service
costs N20 per enquiry.