The booming black market foreign exchange business in Accra
The financial architecture of Ghana has been hugely shaken since the Bank of Ghana (BoG) revoked the operating licences of some 72 microfinance companies in Ghana.
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This news has surprised many players in the financial market. However, it did not come as a big surprise to some analysts considering the bad press some microfinance companies such as DKM Microfinance, God Is Love Fan Club, Care for Humanity and a host of others had suffered in recent past.
However, as the BoG is struggling to shore up the cedi against the major foreign currencies, there is also another practice happening at the blind side of the BoG that needs to be checked. That is the issue of black market foreign exchange business.
Despite their illegality, the black market foreign exchange business seems to be gaining notoriety within the Central Business District of Accra especially in areas such as the Tudu, Market Area and Lava; all the way to Cow Lane on the High Street.
These operators, mostly foreign nationals from Nigeria, Niger, Mali and other countries, are doing brisk business.
Right under the nose of the Greater Accra Regional Police Headquarters and in the Tudu Market Area; are foreign currency black marketers, who strategically sit on benches and brazenly engage people in forex transaction.
Abdul-Kadrl, a Nigerian, says he has been doing this business for some time and described it as booming. He says he buys and sells foreign currencies ranging from the US dollar, the Pound Sterling, CFA Franc, the Chinese Yuan, and the Naira, to his clients.
He says most people like to do business with them because they give better rates than the legalised forex bureau operators.
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Mr Samuel Adu-Gyamfi , a trader at Tudu, says he prefers to do business with black market forex dealers when he is not able to withdraw enough dollars from the bank due to limits on foreign currency withdrawal.
The Worrisome situation
Seidu Haruna, the owner of a licensed foreign-exchange bureau in the capital of Ghana, says the central bank’s clampdown on dollar sales to prop up the domestic currency drives customers to black-market traders in an alley around the corner.
“People who want the dollar, they are willing to give millions of cedis,” Haruna, 62, who has been in the foreign-exchange business for 22 years, said, “The problem is that our security services seem not to care,” he added.
A financial expert with the Barclays Bank Ghana, Mr Komla Nyalate, has noted that the practice is illegal and contravenes BoG directives on forex operations in Ghana.
He said this practice, though it seems to have a minimal impact on the demand of the dollar on the financial market, could have a long term effect on the forex business in the country, if not checked.
Mr Nyalate said only BoG licenced forex bureau operators are mandated to do forex operations and called on Ghanaians to do forex business with only legal operators to guarantee their financial security.
BoG regulations
By Section 29 of the Foreign Exchange Act, 2006, it is a crime to deal in foreign exchange without a licence.
The 2014 BoG regulations also require forex operators to computerise their operations by adopting the certified software approved by the BoG.
Operators are also to cease issuing manual receipts and only issue electronic receipts for all transactions (purchases and sales) in the format prescribed by the BoG.
They are further required to keep electronic records of all purchases and sales that will include the name of the customer, the date of transaction, the amount purchased or sold and proof of identity, such as a passport, a voter’s or national ID or a driving licence.
They are also to submit monthly returns electronically to the BoG within five working days after the end of the month, with no manual returns being accepted.
History
The black market in currencies refers to the illegal or parallel market in foreign exchange in various countries around the world. The market forms part of the underground economy by virtue of the operations being done outside legal banking channels.
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The currency black market flourished in Ghana until the financial market was liberalised in 1988 to allow the operation of forex bureaus. Before then, the black market was the only alternative to the more restrictive foreign exchange system operated by the traditional banks.