ABCON: CBN’s FX policy widened naira-dollar exchange rate gap by N300

The Association of Bureau De Change Operators of Nigeria (ABCON) says the foreign exchange policy of the Central Bank of Nigeria (CBN) has adversely impacted the naira stability across all markets and created a huge premium between official and parallel market rates.

In a statement on Sunday, Aminu Gwadabe, ABCON president, explained that with the official market rate now at N430/$ and parallel market rate now at N730/$, a huge rate gap of N300/$ now exists in the markets.

According to Gwadabe, the selling of forex earnings at a fixed rate of N430/$, while open market rate is N730/$ is an “unorthodox practice that lacks credibility and transparency”.

“That singular act encourages rent-seeking, currency substitution that continues to hurt real sector operators and the overall economy,” he said.

Gwadabe recalled that when the apex bank decided to suspend sales of forex to Bureau De Change (BDCs) in July 2021, the open market rate was about N501/$.

He said over a year after, the naira to the dollar has depreciated significantly, with a lot of Nigerians not meeting their invisible transaction needs and the regulator not showing much commitment to meeting those needs.

The ABCON president said the small retail exchange institutions — BDCs — remain at the centre of CBN’s exchange rate policies implementation, hence the need for the regulator and public to continuously support BDCs’ roles in exchange rate stability.

This, he added, can be achieved through increased automation of their processes and providing more channels of transactions for sustainable price equilibrium while eradicating rent-seeking, currency substitution and speculation.

“I am very confident that Nigeria will, in-the-not-too-distant-future, appreciate a stable exchange rate and availability of forex in the local economy as the right people for government policies’ implementation get such responsibility,” he said.

Gwadabe said Godwin Emefiele, CBN governor, had tried to introduce many policies beyond conventional money supply that are not in line with market realities.

He described the ‘naira-4-dollar’ scheme of N5 bonus for every $1 diaspora remittance as well as the N65 rebate for every dollar of non-oil export proceeds and other incentives as commendable, but added that such policies required total overhaul with stakeholders’ engagement.

“I am not a prophet of doom and student of continuing naira depreciation but except fundamental goodwill and courage is demonstrated, the naira will continue to suffer loss in exchange for the greenbacks,” Gwadabe maintained.

“The question on the lips of everyone is that are the banks not having the allocation for invisible transactions?”

Speaking on sources of forex for BDCs since the CBN ban, he said though some operators are lucky to be operating at the international airport and other off-table transactions, the majority of them are out of business due to lack or total absence of alternative sources.

Gwadabe said an average BDC operator licensed by CBN is comatose and heading for extinction.

He added that the apex bank had maintained that the suspension of FX sales to the BDCs did not lead to the revocation of licenses as the operators are still under the purview of CBN regulations.

“However, the suspension has led to increasing practices of ungoverned space players, crunch liquidity of FX to the retail end of the market and the resultant exchange rate volatility,” he said.

“We in ABCON believe in self-regulatory reforms as sine qua non to the lingering exchange rate volatility. ABCON has always been proactive in ensuring BDCs participate and comply with global practices.”

To strengthen the naira, Gwadabe said it is time to allow competition and mutually-beneficial engagements among stakeholders and regulators.