The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has disclosed that the central bank frittered away a whopping $66 billion over an 11-year period funding Bureau de Change (BDC) operators, blaming this as one of the several policies that led to the erosion of Nigeria’s foreign reserves and is partly to blame for the economic crisis in the country today.
Speaking to journalists at the weekend, Emefiele recalled that in September 2008, Nigeria’s foreign reserves stood at $62 billion when crude prices peaked at $147 per barrel, noting however that rather than save the money or invest it in infrastructure and industry for wealth creation, previous governments embarked on frivolous spending, disclosing that in 11 years, Nigeria spent $66 billion funding BDC operators.
He said: “In September 2008, Nigeria’s foreign reserves stood at $62 billion. But what did we do with $62 billion at a time crude price was in excess of $120 per barrel?
“What we could have done was to save the money, if we couldn’t save the money, invest it in infrastructure and industry that will create productivity and wealth for our people.
“Instead, the central bank at that time went about licensing Class A, Class B and Class C bureau de change operators. For Class A BDCs, the central bank was allocating $1 million per week, for Class B, the CBN was allocating $750,000 per week and for class C BDCs, the central bank was allocating $500,000 per week. The CBN was among one of the few central banks in the world allocating dollar cash for BDC operations.”
He revealed that between 2005 and January 2016 when it was stopped, the CBN had disbursed $66 billion to fund the cash operations of BDCs in Nigeria.
“What that meant was that in 11 years, we spent $66 billion funding the operations of BDCs which came to an average of $6 billion a year. If we had thought of other ways to utilise our reserve, especially in 2008 when our reserves were as high as $62 billion, certainly we will not be where we are today,” said the visibly agitated Emefiele.
The CBN boss, who recalled his worst experience as the chief executive of Zenith Bank Plc and how he was punished for not participating in funding of BDC operations, said: “We had a situation where at that time, as the MD of Zenith Bank, there was a deputy governor of the central bank that would call to query me as to why I was not coming to the central bank to collect dollar cash to sell to BDCs.
“I was informed that some people in Port Harcourt, Lagos and Kano were calling to complain that Zenith Bank was not selling dollar cash to BDCs, but of course the bank did not see any serious need to sell dollar cash for BDC operations at that time. So that was what we did with part of the $62 billion foreign reserves.
“Between 2009 and 2014, you remember in 2009 when we had the crisis, when it started with the Lehman Brothers collapse, America pumped a lot of money to stimulate its economy and as a result of that, money flowed into emerging markets including Nigeria.
“At that time again, Nigeria removed all forms of captive controls to encourage the flow of capital into Nigeria. So what happened during that time was that for five straight years, we saw crude prices at above $105 per barrel on the average for five straight years.
“In that period, we also saw flow of capital into emerging markets including Nigeria. So we should have at that time built our reserves but we did not, and these were some of the actions they took at the central bank that got us where we are today.”