The President, Association of Bureau De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadebe in this interview with the Publisher, Nigerian NewsDirect Dr. Samuel Ibiyemi said the association supported the Central Bank of Nigeria (CBN) economy diversification and investing resources in training of members to strengthten compliance with forex my arket regulations. Excerpt
With COVID-19 and focus by FG on diversifying Nigeria’s economy, what role is ABCON playing?
The country’s strategic policy now is backward integration. This is because Nigeria is an import-dependent country with over 10,000 porous borders which allows other things to come into the country.
So, the objective of diversification is a long phenomenon. The successive governments have been talking about diversification from the 60s till date.
We saw a large level of achievements around 60s and 70s before the oil boom. But immediately after the oil boom, it turned out to be Agriculture thing amid oil mega dominating everything. Nigerian values were externalized which is part of the current crisis we are facing.
Smuggled goods, exported goods are the major problems and there is no nation that can survive without self-sufficiency.
It’s very interesting to see the government encouraging the diversification of the economy, not even encouraging financing it. A lot of money through the Anchor borrower scheme invested in rice. Now to a large extent, most Nigerians are now eating locally made rice.
Covid-19 also necessitated by this diversification because borders were closed due to the impact of the virus.
People were also saying that farmers cannot even go to their farms because of the restriction of movement. We had security situations, kidnapping and banditry. So, all these put together necessitated the calls for diversification and ABCON supported diversification.
Reason being that if our little foreign reserve is being used to import toothpick, where will ABCON members get their currency to be trading with? Nigeria is not a Tourist destination like South Africa, Indian, and Saudi Arabia.
The reason, why we supported the idea of diversification, is because it will expand our covers and remove the volatility of the exchange rate. Once there is the volatility of the exchange rate, the Central Bank of Nigeria will not allow Bureau De change to sleep.
This is because the mandate of the Bureau De Change is to ensure there is no volatility, and to ensure there is no wider gap.
So, if there is self-reliance it means there is enough buffers that will help the economy. People that want to travel can get their traveling allowance easily and at a cheaper rate. Also, people that want to pay for school fees can get their dollars for the payment of their children’s school fees.
Likewise, those people who always pay for one subscription or the other, one exam or the other can pay for their subscription easily.
BDCs are retail outlets to serve critical retail outlets. We are not meant to do import financing. if you want to do finance import go to the bank and fill in the form. But if you want to travel and you need $2000 or $3000, go to a Bureau De Change. So if all the Dollars have been used to import rice or tyre, then the country is in crisis.
We draw an aspiration from the diversification policy of the federal government. We had a very strategic relationship with the federal institute of industrial research.
Not long ago, about 20 of the Executive members of BDC attended a 3-day training of 5 technologies. We were into groups; there were Fish smoking, Bakery, Juice drink, we were there as entrepreneurs so that we can add value to Agricultural products. Most of the time, one of the problems is how do we add value and how do we process these Agricultural products?
We have wastages!. So we went there to understudy the basic technology that members can learn through the Institute of Industrial research. We go all over the Zones to showcase these opportunities to our members to invest in.
So that is why even Industrial research has identified about 5-agricultural products in each of the 774 local governments.
If you go there, from your own local government, they can give you five agricultural products someone can process and add value, and they will give you a technology to do it.
So we are partnering with them to diversify the economy.
Our members are all out because our interest lies in the strength of our buffers. If we have a weak buffer, we will have a weak Naira currency which will affect capital.
Our advice is, we should not jump to default deregulation. The mistake we had then, we did not even finish Agricultural revolution before we jump into the Industrial revolution, leaving the Agricultural sector that would have given inputs for the industrial revolution.
ABCON job is to stabilize the foreign exchange market and not to import. With downtime economy, how has your members been surviving?
From March till September last year, virtually all our source of incomes were shut down; no travelling, there are restrictions of movement and we witness a lot of unemployment.
In fact, for six months, no revenue was coming into our office and our offices were shut down. It wasn’t an interesting situation, our members were stranded during the COVID-19 lockdown and downtime.
During the lockdown, the intervention was not there and automatically, our business was shut down and when there was relaxation of movement by August to December as airport were opened, the volume of our business was reduced to 25per cent from 100 per cent.
We used to have intervention about $75,000 weekly and now we have $20,000 dollar per week. This is because the revenue got the volume currency and internally generated revenue for the entire association 46000 members each DVC per week. So you can see the damage of COVID-19 on our economy system.
Up till now, a lot of countries have not opened there international borders for foreigners and some of their citizens to come into the country.
We are still in limbo and that’s why the recent advocacy now is that we have found out that diaspora remittance during the COVID-19 are not consistent, not stable like the oil revenue and that’s why the advocacy for diversification of economy is necessary.
For example, if you want to change $200 – 500, you don’t need to enter a bank. There are lots of kiosks exchange houses, hotels where they make little transactions and why we are still appealing to the Central Bank of Nigeria.
Secondly, is the remittancel capture because we are talking about $29 billion and what we captured of recent was $2.3 billion talking of the proxy from Diaspora remittance but the rest is going to unlicensed channels and this couple with fixed exchange rate and physical exchange rates.
In other economies, we don’t see a wider gap like that and ours is as a result of institutional distortions in our economy.
Everybody have become exchange man on the street and 80per cent of Nigerian are bureau operators of incentives and there are lots of incentives between fixed rate and flexible exchange rate.
The twos are speculation of adjust naira because what makes your currency strong is buffer.
For example, if I see your own buffer reserved below the balance of your debt payment. I will know definitely if you cannot meet your obligations, so I can speculate against you.
A lot of people are speculating against our local currency because we don’t have accurate foreign reserved.
Imagine, United Arab Emirates and Singapore have over hundred billion dollars, that is the budget of Egypt and South Africa. Ours is not even one third of their own and our population is more than Egypt. I learnt Egypt was building around $65 billion annually.
So is all about reserved management and diversification of economy. Nigerian should increase consumption of goods made in Nigeria or increase our exportation output.
In what ways do you think we can increase our buffer?
Mostly, we only look at demand major ban lists of demand major;rice importation was once major demand in Nigeria before the government put a banned on it.
There are restricted items by CBN. There are different markets like SME and these are demand major. Going back to your question, our main foreign exchange buffer is crude oil.
Firstly, the foreign direct investment is not even there until recently we are started seeing nonoil export proxy coming in.
Another source is the Diaspora remittances; this is the cheapest, most valuable and consistent. More so, I am not sure Nigeria spent $29 billion crude oil annually.
The content that is coming into Nigeria is third after India. China is the first while Nigeria is the third. Diaspora remittance is important and this not area we are looking into. We are not leveraging on it and this is a consistent source of supply. India is using over $30 billion yearly of their Diaspora proxy and the volume $30 billion in India is for infrastructure.
How do you capture Diaspora remittance In Nigeria?
The central bank has taken some major or drastic steps and one of the steps is to increase the number of the companies in charge of bringing in the Diaspora proxy through international money transfer operators.
Before then, only three operators were operating in Nigeria. They now dominate the money transfer business in Nigeria then but now we have a lot of licensed operators across Nigeria?
Central Bank has registered about 400 money transfer operators in Nigeria. Long time ago, CBN introduced with another policy that no any IMTO owning bank should pay naira of the Diaspora proxy. They must pay the beneficiary in hard currency. They also came in with another policy that 5naira for one dollar. What we are really saying here is that people are taking dollar to the black market cannot really be capture.
You won’t believe that some of these unlicensed agents or operators get benefit higher than the normal banks exchange rate because of their wider charges. There is a wider rate between the official exchange rate market and unlicensed dealer market rate.
The solution is that CBN must have a Value Change Approach, which means involving different stakeholders in the ecosystem.
For instance, in the Diaspora remittance, we have the sender, the receiver and the exchange agent. The International Money Transfer Association is agitating and clamouring for zero charges on remittance because they are humanitarians group and most of their proxy is going to less privilege. No wonder a lot of people have taken their money to the black market where they will get more higher rate.
What are you doing to create awareness about your activities and identify errant members?
Our focus is to build capacity of members so that they will continue to comply with rules and regulations.
We finished training of our members recently and we are stiill consulting.
We are having no friendshere.