To achieve fair pricing and stability for the naira, the Association of Bureaux De Change Operators of Nigeria (ABCON) has launched a Uniform Weekly Exchange Rate for Licensed Bureaux De Change portal to enforce same rate for operators.
The foreign exchange (forex) market is driven by information flow and investors’ sentiments. The type of information available to local and international investors helps to swing rates. It therefore follows that positive information flow translates to better pricing for the naira and vice versa.
Having recognised these facts, the Association of Bureaux De Change Operators of Nigeria (ABCON), which is the umbrella body for all Central Bank of Nigeria (CBN) licensed Bureaux de Change (BDCs) last Tuesday, launched the Uniform Weekly Exchange Rate for Licensed Bureaux De Change Portal.
The portal was meant to enable BDCs achieve same exchange rate for the naira against the dollar across all licensed operators.
The ABCON President, Alhaji Aminu Gwadabe, who launched the portal at the maiden meeting with business editors last Tuesday in Lagos, said it would bring exchange rate convergence, eradicate currency speculation and ensure speedy recovery of the naira against the dollar. He said such feats were in line with Central Bank of Nigeria (CBN) Governor, Godwin Emefiele’s plan to stabilise the naira and boost investor confidence in the economy.
According to Gwadabe, the purpose of the BDCs Weekly Rate was to make it a reference point for realistic rates in the market that would boost foreign investment inflows and displace the damaging effect of foreign media platform to the economy.
Gwadabe was confident that with the gradual recovery in crude oil prices, enhanced commitment of the CBN to economy diversification, which has led to rising production of local rice and drop in import bills, as well as political will of President Muhammadu Buhari to implement key economic reforms, the task of achieving a single determined exchange rate would be realised.
He urged the media to adopt a single rate in their reporting, and always quote rate on the ABCON website- www.abcong.ng for consistency and uniformity of reporting.
The ABCON chief reiterated the need for the public to deal with CBN-licensed BDCs only, and urged the public to report errant operators for necessary sanction. “ABCON wishes to reiterate its willingness to embark on a comprehensive media campaign on the roles, activities and location of members nation-wide so as to provide a guide to the public in dealing with only CBN-licensed BDCs and for the public to report any errant operator for necessary sanction,” he said.
The ABCON boss said there was need for the CBN and Federal Government to harmonise the multiple official exchange rates in the country and adopt a unified rate for transactions.
Calling for the adoption of a single forex market rate system, he said licensed BDCs would post an exchange rate each Monday on its website from January 16 to “highlight positive rate development in the market” and counter domains such as Abokifx.com, which publishes ‘high’ unofficial prices daily.
Trading in the parallel market became more regular since 2014 after the CBN strengthened capital controls as crude oil prices dropped. Dollar trades for about N490, compared with the official rate of about N315. The BDCs will initially quote a rate of N399, Gwadabe said.
Stakeholders React
Former Executive Director, Keystone Bank, Richard Obire, said that ABCON implementing unified rate across all CBN- registered BDCs will bring sanity to the forex market. “I do not know how the group wants to achieve this but if well implemented, it will bring orderliness to the market. It is easier to achieve such feats as Personal Travel Allowance and Business Travel Allowance transactions. It is really a good initiative that will reduce the level of uncertainty in the market,” he said.
Associate – Research, Eczellon Capital Limited, Mustapha Suberu, said there was need to allow a transparent price discovery in the market, which he believed would stimulate dollar inflows into the economy and subsequently, lead to local currency stability.
He called for more transparent forex market that would allow foreign investors to invest in the economy, and bring about positive market-determined rate.
Besides, Managing Director, Afrinvest West Africa, Ike Chioke, believes the incorporation of a long-term diversified strategy in fiscal policy is required to cushion shocks in various segments of the economy and revive the naira.
To him, the persistent pressure on the naira could have been minimised if a counter-fiscal policy had been developed, as the CBN cannot continue to defend the naira with foreign reserves.
“To reduce this pressure, an inward looking policy (tax incentives, infrastructure development and production subsidy) should be emphasised to reduce the dependence on imported goods”, he said.
He explained that apart from oil receipts, the development of the agricultural sector would in the short term reduce the forex burden of food imports and on the long run, enhance foreign receipts if its comparative advantage in the sector is efficiently deployed.
In his analysis, economist and former acting Managing Director, Unity Bank Plc, Dr. Muhammad Rislanudeen, described the collaboration between BDCs and the CBN as crucial bringing stability to the naira.
But he added it was still not enough to put a peg on FX in the long run.
According to him, “It is a good proactive move by CBN to have stakeholder engagement in finding solution to the volatility in the foreign exchange market. However we can only have stable, predictable exchange rate if there is market stability, where market determine rates. Naira is certainly undervalued in the BDC market even as it is overvalued in the official market where the foreign currency is scarce.
“A situation where we have multiple exchange rates will not support foreign direct and portfolio investments as well as diaspora inflows. BDC market operate based on dictates of market forces and because of lack of liquidity in the official sources, there is pressure on the BDC market. Improved transparency in the market, avoidance of potential speculative demand and round tripping is what is needed to stabilise the foreign exchange market thereby having liquidity improved and allowing the market to correct itself.
“In so doing, we will begin to see improvement in the capital importation, improved performance of manufacturing sector in GDP growth, reduced unemployment rate and also easing up of imported and cost push inflation. Beyond that, export income diversification as well as reduction in imports of basic needs like food will, in long term, ease pressure on the forex market.” – Thisday.
