Nigerian forex traders in hiding one week after nationwide EFCC raid

Following policy changes targeting Bureau de Change operators last week, operators and currency traders are staying away from street trading, three operators told TechCabal on Monday morning. At least two operators cited a fear of being arrested by officials of the Economic and Financial Crimes Commission (EFCC).

The EFCC arrested over 100 currency traders in Lagos last week, according to a Nigerian publication, as FX volatility worsened.

“A lot of BDC agents have been hiding since last week in fear of being arrested,” a trader at Masha, a spot where clusters of BDC operators could usually be found, told TechCabal.

Abbas, another BDC operator who operates at Tejuosho, a shopping complex in Lagos, and a popular spot for currency traders, said he now operates from his office, instead of the open market where he used to make direct contact with new customers.

In May 2023, Nigeria’s Central bank relaxed FX controls, hoping for stability and a harmonisation of rates. What happened instead was a steep fall in the value of the Naira, which the government is desperate to fix. The arrest of BDC operators is only the latest in a series of unorthodox policies.

“[The CBN] believes that they are manipulating the market,” a person familiar with the CBN’s operations told TechCabal over a call.

In the short term, the government and its supporters are hailing the short-term stability, with rates cooling to around ₦1500/$1 on Monday morning, down from ₦1800/$1 quoted on Friday, according to quotes from two currency traders.

Nigerian authorities blocked access to the websites of crypto companies last week and also pegged rates on Binance, a global crypto exchange.

The prevailing thinking on the government’s side is that speculators are taking advantage of the situation to artificially inflate prices, but many experts disagree, pointing out an absence of liquidity as the real cause of the problems.

A source close to the CBN asserted to TechCabal that the change in the market, albeit positive, will only be temporary unless the apex bank makes systemic changes that will solve the liquidity problem.

He shared optimism about some of the plans the apex bank has proposed to sustainably fix the problem.

“The CBN may start funding Bureau de Change operators that have up-to-date records of their transactions. They may also increase interest rates and consequently encourage foreign investment into the country and reduce the demand for the dollar.”

It has led to some short-term stability.

This follows reports that the Central Bank of Nigeria, in collaboration with the National Security Adviser, raised task forces in the police force and the EFCC to raid and arrest speculators who the CBN says are engaging in illicit activities that are depreciating the naira.