Forex Operators Divided Over Retail DAS

The contradictory opinions trail the central bank of the reintroduction of Nigeria of Dutch system to the detail of bidding as measures to limit the freefall of the value of will naira, even while some see it as a retrogressive movement, Babajide Komolafe written

Retailers of foreign currencies in banking environment are divided above the decision of the central bank of Nigeria (BCN) to suspend the Dutch system approximately bidding (WDAS) and to reintroduce the Dutch system with the detail of bidding (RDAS). They also show the bank of apex of favouritism, and, while thus making, giving to some banks the abnormal advantage compared to others on the market of foreign currencies interbank.

Last week, while being addressed to the financial journalists on the recent depreciation of Naira, the governor of BCN, Prof Chukwuma Soludo, revealed that, in order to shorten pointed practices, particularly around release on the market of foreign currencies, it, for the moment, WDAS suspended and to reintroduce RDAS
This decision, however, produced argument among the retailers of foreign currencies. While some believe that it is the step in the right direction, which would help the speculation of edge on the market, others proved that it is summersault of policy and it is equivalent to displacement backwards.

An elder treasurer in one of the bank of new generation, which recommended the reintroduction of RDAS, said that what the bank of apex tries to do is to uncover the users of foreign currencies, stops activities of the intermediaries and precedes them around release. He, however, advised that the bank of apex should make more than that, adding that the emphase should be on what of foreign currencies bought is employed for the force-with-force their importance or contribution to the economic activities. Since the bank of apex does not have enough foreign currencies for each goal, it should evaluate tendered for customers on the basis of impact on the economic output.

The BCN should not employ foreign currencies rare to place frivolous services. But to have the will to make thus, to reject the offers of foreign currencies for which are considered to be envisaged not also the important uses is other subject, particularly when the offer comes from large companies and people strongly connected to the corridors from the power.

Also recommend the reintroduction of RDAS, an elder treasurer in one of the five principal banks said that reintroducing RDAS a step in the right direction. But it noted that the bank of apex did not need really to reintroduce RDAS to limit the speculation and the tendencies for pointed practices. What the bank of apex should have fact is to reverse the policy which makes it possible the bank to trade with foreign currencies bought of the official market of the interbank market.

This policy is one of the factors behind the speculation on the market, and once it is reversed, there would be health of spirit on the market. But, by reintroducing RDAS, the BCN indirectly the policy reversed because, with RDAS, the BCN says indirectly that you can only buy foreign currencies official for your customers and not for yourself and try to resell in the interbank one to make the fast profit.

Moreover, the BCN must reduce the limit of position of opening of the banks by more than 50 percent while they indicated it. Being given the enormous shareholders of the funds of the banks due to the consolidation you exert, the limit of position of opening of the majority of the banks is so high and this their gave the resources to speculate in foreign currencies.

One leaves the limit of position of opening is the quantity of banks of foreign currencies to keep during the night. It was of 20 percent of the funds of the shareholders expressed in dollars, but was reduced to 10 percent two weeks ago and, effective this week, it was still reduced to 5 percent.

But a retailer of foreign currencies elder at a bank of new generation censured the reintroduction of RDAS saying that it is a voyage backwards. What the made BCN is us to bring back ten years. The world exceeded RDAS and no where they are always making RDAS. What obtains around the world is WDAS. RDAS is cumbersome. You must sit down and compile their documentation of the customers the offer and before the setting in their offer with the BCN. All this takes time.

The BCN does not need to recall us RDAS to the round release of control. Since they have the inspectors resident now, they can employ them to check around release and others practical pointed.
Another retailer of foreign currencies proved that what is necessary is transparency and objectivity on behalf of BCN. According to him, the BCN was not objective and transparent lately and it is what speculation caused on the market. Even if you want to allow Naira to depreciate, the way in which the bank of apex entered approximately it transparent but were not reserved, and because operators were maintained in the darkness, they resorted to the speculation.

The operators of foreign currencies also showed the BCN of favouritism and the encouraging pointed practices. They plead that while the majority of the banks were maintained in the darkness, some banks obtained the anticipated information of the BCN about the depreciation and this their gave the advantage compared to other banks on the market. According to them, in one of the bidding of foreign currencies, the BCN was sold at only one bank that day while the offer of other banks were rejected. The bank, one of the five principal banks, it was collected, buy $150 million that day, and because the bank of apex did not sell at other banks, that the particular bank sold the dollars at the interbank market with margins of N5 per dollar, and in the process made the profit N750 million.

According to the operators of foreign currencies, the BCN cannot claim to limit pointed practices by the reintroduction of RDAS while it is practical pointed in an encouraging way on the market.
While waiting, the BCN left an official statement by its Monetary policy committee (MPC) last week and it revealed the directives for the reintroduction of RDAS.

The official statement indicated, MPC also reviewed the recent developments in the market of foreign currencies and the depreciation of will naira in the light of the provisioning decreased of increased request for force-with-force of foreign currencies. It noted the speculative uncertainties and pressures on the market of foreign currencies.

The MPC noted that while it is desirable to make it possible foreign exchange rate to adjust itself in answer to the conditions of market, the BCN remains given to reconstitute stability at the market. Consequently, the MPC decided as follows: While waiting, the BCN reintroduces the Dutch system with the detail of bidding (RDAS), with the effect from Monday January 19, 2009, and will be led Monday and Wednesday. We will turn over to WDAS to the convenient period; Offers for the purchase of foreign currencies under the supported RDAS owe money-being per hour of the offer and; Bought funds of the BCN to the bidding will be employed for eligible transactions only, prone to the stipulated conditions of documentation. Such funds will not be transmissible on the market of foreign currencies interbank.

Others include the authorized retailers will return to the BCN all the funds not used within 5 Day Business after the delivery, at the rate of purchase; Purchases by banks in the name of their customers will be published in the newspapers every fifteen days; The interest gained on letters of credit drawn up and for which payment was not carried out will be repatriated with the BCN for the repurchase at the rate of offer whereas the funds were bought; The position of clear opening of foreign currencies (NOP) of the banks will be reduced by 10 to 5 percent with the effect from Monday January 19, 2009 and; The remainders of BCN made with section 15 (4) of the act of foreign currencies (of monitoring and various provisions) of 1995, which guarantees the transferability without underground mining conditions with regard to loans, and direct investments of booklet and foreigners in Nigeria.