The gradual recovery of Nigeria’s currency, the naira, in the last few weeks has been accredited to more investment in government instruments, clearance of $7 billion forex backlog forward commitments and the recall of the BDCs at the retail end of the forex market.
The Association of Bureaux de Change Operators of Nigeria (ABCON), who disclosed this on Monday, applauded the decision of the Central Bank of Nigeria (CBN) led by Olayemi Cardoso to recall BDCs into the mainstream FX market, describing it as a major factor in ongoing exchange rate stability.
Dr. Aminu Gwadabe, ABCON’s president, was full of gratitude to the CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate transmission mechanism in forex management.
He said,
“The reconsideration of the BDCs into the mainstream foreign exchange market has not only demystified illegal economic behaviours such as hoarding, rent seeking, round tripping and FX holding position, but also led to the emergence of exchange rate convergence.”
Gwadabe said that the stability in the exchange rate has already started to have a positive impact on the prices of goods and services.
He noted that for instance the price for international school fees has dropped by 15 percent; cost of medical tourism reduced by 20 percent and prices of air fares for local and international trips dipped by 25 percent.
“The current developments in the foreign exchange market has started reining in inflation as prices of most necessities are becoming relatively lower in the market. In a more serious note, the positive impacts include also heightened confidence of the public in the local currency as it eliminates currency substitution behaviour which hitherto added pressure on our local currency”, he added.
Gwadabe said the success story is unending as naira traded at N1,255/$ on Saturday, even lower than N1,269.765 rates BDCs were advised to sell.
Describing the ongoing market development as revolutionary, Gwadabe said stable naira will attract more foreign portfolio inflows to the economy.
He said the naira has appreciated from February low of N1,915/$ to N1,255/$, representing N660 gain, which is significant by all measures.
He said the gains of the CBN under Cardoso to recognise the power of BDCs in securing stable exchange rate cannot be overemphasised.
He also said that previous practice where people took dollars from Nigeria to Dubai for hoarding has ceased.
Gwadabe said that today, following the rapid recovery of the naira against the dollar, the purchase of dollars in Dubai is cheaper than in Nigeria and therefore created business opportunities for dollar inflows rather than outflows to the economy.
Going forward, he said that prospects for forex earnings are promising, with foreign portfolio investments on the rise and over $1.5 billion inflows few days after the Monetary Policy Committee (MPC) raised interest rate by 200 basis points.
He said increases in foreign exchange inflows into the economy through the CBN’s monetary instruments is helping to boost foreign reserve accretion and gives the apex bank the necessary power to continue to defend the local currency.
“It is our view that the collaboration between the BDCs, CBN, National Security Adviser, the Economic and Financial Crimes Commission (EFCC), as well as support from the Presidency helped in creating the opportunity for building the foundation of this achievement. Overall, the combination of these actions have induced an atmosphere of public calmness, confidence, hopes and liquidity in the markets.
“We therefore call on the CBN to continue to calibrate the existing relationship between the BDCs and the apex bank to sustain the success story,” he advised.
On the recent reforms in the financial industry, the ABCON chief reiterated the resolve of ABCON to continually collaborate with the CBN in carrying all its members along in achieving a win-win situation.
He said this is expected to help in safeguarding investments, harnessing skills of BDC operators and boosting employment within the financial services sector.
