By Kayode Tokede
Foreign Exchange traders under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON) have called on the Central Bank of Nigeria (CBN) to investigate the actual causes of Naira depreciation since July 2nd when it suspended dollar sales to 5,000 of its members.
Recently, the CBN discontinued interventions to the Bureau De Change (BDC) operators sub sector and promised to fund the Money Deposit banks to bridge the gap between the parallel market and official foreign exchange rate.
According to ABCON, “Statistics showed that more than $6 billion was injected during July to September 2021. Equally during the same period, the parallel market exchange rate depreciated from N500 to N570 per dollar.”
The association, thus, questioned the Deposit Money Banks inability to bridge the gap of supplying foreign exchange to satisfy the demand earlier fulfilled by BDCs.
ABCON in its quarterly economic review for the 3rd quarter of the year (Q3’21) in a report accessed by Nigerian NewsDirect asked, “Why are the Money Deposit Banks unable to bridge the gap of supplying foreign exchange to satisfy the demand earlier fulfilled by BDCs? Believing that BDCs sold only Personal and Business Travel Allowances which the banks are equally selling now.
“What were the actual causes of the depreciation from N400 to N500 per US dollar earlier in the year 2021 if discontinuing sales to BDCs did not stop the trend? OR could the alleged sharp practices of the BDCs be responsible for the continued depreciation of Naira in the parallel foreign exchange market after their suspension.
“If sharp practices of the BDCs were responsible for the poor policy performance of the apex bank, why has the market not responded to the policy since CBN discontinued sales to the sub sector.
“Was discontinuing intervention to BDC sub sector the actual solution to the question of bridging the gap between NAFEX and Parallel market exchange rates?
“Why is CBN not consistent in its perception and treatment of the BDC sub sector, calling a dog a bad name all the time? This is the third occasion CBN will publish blackmailing accusations against BDCs yet after a while to recall them back for interventions, when all efforts to arrest the free fall of the currency have failed.
“If the role of BDCs are indispensable in Nigeria’s context of foreign exchange market, How can the BDC sector be better positioned to function as exchange rate stabilisation tool in view of the advantages observed.”
The association advocated some measures aimed at curbing the continued depreciation of the naira.
This follows the current crisis in the foreign exchange market which is characterised by dollar shortages, speculative trading, hoarding and other illegal activities by currency traders.
ABCON noted that recent developments in the foreign exchange market have proven that the suspension of dollar sales to BDCs is not the solution to the continued depreciation of the naira in the parallel market.
It added that the continued depreciation of the naira has also proven that BDCs are indispensable in Nigeria’s context of foreign exchange market.
Some of the measures being advocated by ABCON to help address the continued depreciation of the naira include a call on the Central Bank of Nigeria (CBN) to restructure the BDC sub-sector. It also called on the CBN to resume dollar sales to the public through BDCs especially in view of the failure of the intervention through Deposit Money Banks to bridge the gap between the official and parallel market exchange rate.
The Association stated, “Industrialists have reported increased scarcity of foreign exchange in the system since the stoppage of intervention to BDCs which is an indication that, irrespective of the anomaly observed in the operations of BDCs, part of the allocation to the sub sector flows into the real sector.
“Thus, it is logical to consider restructuring BDC operations to weed out the dysfunctional units and operators bringing out the real outfits for operational efficiency. These can be achieved through the design of a dynamic operational modalities of standard practices
“The refined outfits can effectively operate on independent transparent platforms dealing in autonomous funds in the economy.
“They should be permitted to operate as a fully independent foreign exchange professional under the best practices in international foreign exchange operations. Medium scale dealers in foreign exchange should be permitted to operate a lower platform to the Investors and Exporters (I&E) market under a transparent clearing house modalities.
“The market or platform will compete for funds in the global foreign exchange market thereby deriving a merger and stability in exchange rate in the economy. This is a basic solution to the divergent and multiple exchange rates regimes plaguing the Nigerian foreign exchange market for ages.”
The association adviced the BDC-sub sector on the need to note the rising penetration of digitalization trends in the foreign exchange market, along with the increasing number of international tourism activities, which is driving the market for foreign exchange.
ABCON added that, “Additionally, the growing awareness towards numerous benefits of foreign exchange pertaining to minimal trading costs, 24×7 trading opportunities, high transactional transparency, and liquidity, etc., is further augmenting the market growth. Besides this, the wide availability of electronic platforms and the provision of improved security mechanisms for trading are also propelling the global market.
“Several technological advancements in foreign exchange solutions providing advanced outright forward and currency options will continue to drive the market growth in the coming years. Therefore, considering the expectations of the economy and supervisory bodies, BDCs must transform from dispensers of cash interventions by CBN into institutions and sub-sectors for attraction of foreign exchange into the economy.”
ABCON demanded from CBN to institute an appropriate legal action against Aboki forex.
The association said, “If CBN is able to prove any criminal practice in the activities of Aboki forex platform appropriate legal action should be instituted otherwise, it’s derogatory to our apex bank and the base of a large emerging economy like Nigeria to give as much attention to such an insignificant outfit.
“It is because the economy can trade in the published rates that projects Aboki forex as a dictator of Nigeria’s foreign exchange rates.”