The Association of Bureau de Change Operators of Nigeria (ABCON) says the recall of members into the foreign exchange (FX) market has led to stability in the exchange rate.
Aminu Gwadabe, ABCON president, spoke on significant developments in Nigeria’s FX market in a statement on Sunday.
According to Gwadabe, in addition to addressing the $7 billion FX backlog, and the monetary policy tightening that led to more investment in government instruments, the recall of the bureau de change (BDCs) operators by the Central Bank of Nigeria (CBN) was also a significant move to boost dollar liquidity at the retail end of the market.
He thanked the CBN and other relevant agencies for acknowledging the BDCs as a crucial component of the FX market and an efficient mechanism for transmitting exchange rates in FX management.
“The reconsideration of the BDCs into the mainstream foreign exchange market has not only cleared illegal economic behaviours of hoarding, rent-seeking, round tripping and FX holding position, and led to the emergence of exchange rate convergence,” he said.
“The stability in exchange rate has already started to have positive impact on the prices of goods and services.
“For instance, the price for international school fees has dropped by 15 percent; cost of medical tourism reduced by 20 percent and airfares for local and international trips dipped by 25 percent.
“In a most serious note, the positive impacts include also heightened confidence of the public in the local currency as it eliminates currency substitution behaviour which hitherto being (sic) adding pressure on our local currency.”
Gwadabe said the success story is unending, with the naira trading at N1,255/$ on Saturday — which is below the N1,269.765 the BDCs are advised to sell.
“It is our view that the collaboration between the BDCs, CBN, National Security Adviser (NSA), 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,” he said.
“Overall the combination of these actions have induced an atmosphere of public calmness, confidence, hope and liquidity in the markets.
“We call therefore on the CBN to continue to calibrate the existing relationship between the BDCs and the apex bank to sustain the success story.”
Describing the ongoing market development as revolutionary, the ABCON president said a stable naira would attract more foreign portfolio inflows to the economy.
He said prospects for FX earnings are promising, with an increase in foreign portfolio investments (FPI) and inflows exceeding $1.5 billion just days after the monetary policy committee (MPC) raised interest rates by 200 basis points.
Gwadabe said increases in FX inflows through the CBN’s monetary tools are aiding to boost foreign reserve accretion, granting the apex bank the power to defend the local currency.
Gwadabe reiterated ABCON’s commitment to maintaining collaboration with the central bank to ensure that all members benefit mutually, preventing exclusion and the dominance of the sector by larger entities.
The collaboration, he said, aims to safeguard the investments, skills, and capacity of members — mitigating potential losses of capital and unintended consequences such as unemployment and heightened insecurity.
On February 27, CBN approved the sale of FX to BDCs.
Speaking on the decision, the apex bank said it observed the continued price distortions at the retail end of the market, which was feeding into the parallel market and further widening the exchange rate premium.
