Alhaji Aminu Gwadabe is the National President, Association of Bureau de Change Operators of Nigeria (ABCON). In this interview with AYO FADIMU, he speaks on the issues affecting the value of naira against major currencies, efforts of the association to curb quackery and other sundry issues. Excerpts
Sir, recently the Naira has been fluctuating. What is the cause?
The cause is that Nigeria is an import dependent economy and when you are such, you must be faced with shock i.e. exchange rate volatility. The issue is that there is always a currency of import and which is the dollar. We don’t have the direct control over the dollar. At any given time, you find out that our buffers are the main reason you can defend your local currency. We have been up to $60 billion in our foreign reserve and now we are around $30.6 billion. In fact, there was a time we went below that. Also, we have a mono cultural aspect of the economy. This is an economy that derives its revenue from one single commodity which is oil. About 80 per cent of revenue that comes to the country is from oil. And also recently, we have seen how people have earmarked so much dollars due to the porousness and corruption in the system. We find out that people want to keep their earnings in dollars. So, there are many factors putting pressure on the market. Also, there is arbitrage rate between the official and the unofficial rates which are always huge. You find out that people want to be doing round-tripping. The system has allowed that and therefore the pressure will be on the naira as regards the arbitrage in the exchange rate that created the gap.
What about the CBN’s intervention?
The CBN has started impacting because there is no country that wants to allow its currency to float except you are forced. We were forced to float our currency from N197 to where we are today officially because of some daunting challenges. You know our import bills are huge. We are highly dependent. Our investments come from outside so there are lot of forces- visible and invisible. That force regulators and policy makers to allow their currency to float.
So, this is what we have been saying. But at the same time, the CBN is resolute and proactive. They were able to introduce so many memos. We had the IMTOs windows for the BDCs which have impacted positively. We have seen the SMEs window which is also impacting. We have seen the profitability window of foreign investors that is also going to impact. We have also seen the recent one which is the Nigeria Autonomous Foreign Investors and Exporters (NAFEX) windows whereby it is going to be market-determined and this is what the investors have been waiting for a long time where their inflows can be a little bit transparent, secure and accountable. So, all these are some of the strategies put in place by the CBN to ensure that there is liquidity. If not because of this liquidity and some strategic actions the CBN has taken, by now we would be talking N1, 000 to $1. But as a result of their resilience and strategic policy, we have been able to even shame the devil by not allowing the dollar to be N500 as we speak today.
What are you doing as a body to curb the activities of quacks in your profession and how will the public know between a licensed BDC operator and a quack?
What I will say here is that quacks are not our members because they are not licensed by the CBN. And most of them don’t even have offices where they operate. Yes, they are in different strata. It’s not only the Bank of the North BDCs that we see on the street that are only operators or participants in that parallel market. There are many other operators that transact in that business. I said before, the arbitrage opportunity makes almost every FX operator an under table transaction
Other sectors such as banking, these transactions are referred to as free funds transactions, but you know in the parallel, we call it black market. So, we all have different strata of unofficial transactions that is taking place.In our own case, we tried to distinguish ourselves from the parallel market operators because we are registered with CBN through the umbrella body and ensure that our members are compliant and we give them training. As I speak with you, the association has launched a website www. Abcon.ng.com, where almost 3,000 BDCs are on board. This automation is going to be a regulation. It will regulate the activities of licensed BDC operators of Nigeria in the country. It will also serve as a map of all the BDCs in Nigeria. Once you get to that automation platform, this will outwit the challenges of the so called Aboki FX.com. So, it’s going to be live.
How is your relationship with CBN?
There is serious improvement. Then, you know policies sometimes of the regulators can be inhibitive. There are some policies that CBN normally introduces and we find them inhibitive and going to cripple our business. In 2014, CBN came up with capitalization from N10 million to N 35 million. That was a huge demand on us. We complained even though at the end of the day, about 2,700 of our members had met up with the requirement. Also, by the time they introduced the single exchange market early last year, no mention was made of BDC in that paper but I can tell you today, the relationship is robust and effective because we have been partnering in terms of injecting liquidity convergence and harmonization. We have a perfect relationship.