Return of BDCs to Forex Market Will Strengthen Naira—ABCON

naira at forex market

By Modupe Gbadeyanka

The Association of Bureaux De Change Operators of Nigeria (ABCON) has said the local currency has a very strong outlook going forward.

President of the group, Mr Aminu Gwadabe, while speaking on the proposed resumption of sales of foreign exchange (forex) to its over 5,000 members by the Central Bank of Nigeria (CBN), stated that the Naira outlook is expected to remain relatively strong on the back of growing foreign reserves at over $37 billion, increasing global demand for crude oil, rising commodity prices and rising global trade.

He blamed the present pressure on the domestic currency on activities of currency speculators, who he expressed confidence will soon lose up to N10 billion.

He said these speculators have continued to make spurious demand for Dollar with the hope of making good returns from the rising gaps between official and parallel market rates.

But he warned them of the looming danger for their trade if they refuse to retrace their steps as they will incur losses in the next few months as the CBN prepares for BDCs’ return to the forex market after nearly six weeks of absence due to the COVID-19 pandemic and the need to protect operators.

Mr Gwadabe said the CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels as well as global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.

He said the Naira has been exchanging at N461 to a dollar at the parallel market, but will be upbeat once dollar sales to BDCs commence.

“The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators.

“It happened in 2016 and it will happen again in 2020. The return of the BDCs will immediately boost Naira recovery and put the enemies of the economy to shame.

“We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable,” he assured.

Mr Gwadabe said the return of BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.

Aside positive developments in the global economy, the CBN has taken steps to address the risks facing the naira, which will lead to rapid recovery for the local currency.

The ABCON chief said the measures taken by oil producers to sustain price stability were commendable as many governments across the world have agreed to oil production adjustment targets and continued collaboration with all their partners, a move he said will benefit Nigeria.

He said amid huge capital flow reversal, driven by risk-off sentiment, the impact on the Naira was milder compared with the fate of other African countries’ currencies.

According to him, currency rates of African countries show that the South African rand is the worst hit, down 20.6 percent year-to-date.

This was followed by the Angolan Kwanza which has depreciated by 16.1 percent, Mauritius Rupee (-8.8 percent), Nigerian Naira (-6.6 percent) and Kenyan Shilling (-5.3 percent) followed in that order.

Others include the Tunisian Dinar (-3.8 percent), Morocco’s Dirham (-2.7 percent) and the West African Monetary Union’s CFA franc (-2.3 percent). Notably, the Egyptian Pound, up 1.3 percent year-to-date, remains the best performer across the region.

Mr Gwadabe explained that while an adjustment of the Nigerian naira from N360/$ to N385/$ broadly reflects the 6.6 percent weakness observed in the official market, it must be noted that currency depreciation at the unofficial market is much deeper, currently at N461/$.

Speaking on ABCON’s reopening guidelines to all its members nationwide, he said operators will be required to have on-boarding of the queuing crowd ticketing management application known as ABCON 360°QSM portal with over 80 percent members registered nationwide so far.

“We are also updating all regulatory obligations during the lockdown, fumigation of members’ offices/markets, distribution of second phase of face mask nationwide to our members.

“There is also the provision of wash hand basins, sanitizers at our distributions centres while members are to explore school fees, mortgage, subscription payments as one of their allowable scopes during post COVID-19,” he said.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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