Money  

Uniform exchange rate for BDCs and naira’s stability

ABCON President,Aihaji Aminu Gwadabe

ABCON President,Aihaji Aminu Gwadabe

In recent years, the pursuit of exchange rate stability has been tough. The drop in crude oil prices and depletion of foreign reserves have led to the depreciation across markets. Now, the Association of Bureau De Change Operators of Nigeria (ABCON) has launched a Uniform Weekly Exchange Rate for Licensed Bureaux De Change portal, a move they said, was to enforce same-rate for operators and achieve fair pricing and stability for the naira.

Already, stakeholders have applauded the group’s dynamism and assessed support to the policies of the Central Bank of Nigeria (CBN). Could this be the elusive elixir for public confidence on registered operators and needed support to end arbitrage?

The foreign exchange (forex) market is driven by information flow and investors’ sentiments and the type of information available swings the rates for local and international investors. Of course, positive information flow would make the naira better off.

ABCON, the umbrella body for all CBN-licensed Bureaux de Change (BDC) operators, said the lunch of the portal was meant to enable BDCs achieve same exchange rate for the naira against the dollar across all licensed operators.

President of ABCON, Alhaji Aminu Gwadabe, who launched the portal at the maiden Business Editors of Print, Electronic Media and Wire Services, in Lagos, reiterated that the move would bring about exchange rate convergence, eradicate currency speculation and ensure speedy recovery for the naira against the dollar.

He said such feats are in line with Central Bank of Nigeria (CBN) Governor, Godwin Emefiele’s plan to stabilize the naira and boost investors’ confidence in the economy. According to him, the purpose for launching the BDCs Weekly Rate was to make it a reference point for realistic rates in the market that will boost foreign investment inflows and displacing the damaging effect of foreign media platforms to the economy.

He was confident that with the gradual recovery in crude oil prices, enhanced commitment of the CBN to diversification, leading to rising production of local rice and drop in import bills, as well as political will of the government to implement key economic reforms, the task of achieving a single determined exchange rate will be realised.

He urged the media to always quote rate on the ABCON website- www.abcong.ng for consistency and uniformity of reporting, while reiterating the need for people to deal with CBN-licensed BDCs only.

“ABCON wishes to reiterate its willingness to embark on a comprehensive media campaign on the roles, activities and location of members nation-wide to provide a guide to the public in dealing with only CBN-licensed BDCs and report any errant operator for necessary sanction,” he said.

Gwadabe said that CBN now implements between N500,000 to N2 million fines against BDCs that violate regulatory policies, and a risk of license suspension.“We also seek your support and partnership to assist the CBN and government to eliminate or reduce to the barest minimum, activities of parallel market operators. We also want to through our partnership with you, to give visibility to registered BDCs in the market and create more awareness on the role of operators in selling forex to the retail end of the market,” he stated.

Stakeholders’ reaction
Former Executive Director, Keystone Bank, Richard Obire, said that ABCON’s courage to seek a unified rate among themselves 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- 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.

The 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 solicited a well thought-out plan that would impact the forex market activities and allow foreign investors to develop confidence in the economy, and bring about positive market-determined rate.

The 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.

According 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 endlessly.

“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 beside oil receipts, the development of the agricultural sector will in the short-term reduce the forex burden of food imports and in the long run, enhance foreign receipts if its comparative advantage in the sector is efficiently deployed.

Automation of operations
ABCON affirmed that the automation of BDCs’ operations was ongoing, to faciltate online real-time operations and enhancement of compliance among operators. These, the group’s chief noted, would boost transparency of operations, ease of public accessibility of BDCs’ procedures, returns rendition and regulatory supervision. 

“We want to introduce certification for registered BDCs. The ABCON is also coming up with schools that will train and retrain members and encourage record keeping. We believe that once we are able to introduce measures that make the operations of parallel market irrelevant, they will be eradicated,” he said.

He said the BDCs are now jostling to be sole handler of Personal Travel Allowances and Business Travel Allowances, while at the same time, raising their operational modalities to ensure that they become agents of International Money Transfer Operators (IMTOs).He assured that ABCON and CBN would continue to work together and find sustainable solutions to wriggle the economy out of the ongoing forex crisis.

“We have continuously assured the CBN and taken appropriate measures to ensure that purchased funds are disbursed to end users and for eligible transactions only.“We also render weekly returns on purchases from the banks to Trade and Exchange Department of the apex bank.  We also ensure strict compliance to the provisions of the anti-money laundering laws observance of appropriate Know-Your-Customer principles in the handling of forex transactions,” he said.

Re-emphasising the need for a single forex market rate system, he said licensed BDCs will post an exchange rate each Monday on its website from January 16 to “highlight positive rate development in the market” and counter some domains, which he alleged to publish ‘high’ unofficial prices daily.

For a start, BDCs will initially quote exchange rate at N399/$ today.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 ABCON chief said there was need to disregard the parallel market rates, as they are not recognised by law.



3 Comments
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  • infinity2020

    CBN and BDC are the most evil potent cabals holding Nigeria down. Who created BDC? For what purpose was it created? Is BDC another form of CBN for the untouchables? Is BDC suppose to be competing with CBN?. Nigeria is not a COUNTRY but an EVIL ENTITY. Buhari you saw it for what it is but because the EVIL Emefiele agree to do your bidding you could not remove him. This BDC must go and Naira should be allowed to find its own level !!!!!!!

  • Folake Vaughn

    Asking the BDCs for advice on how to reduce the exchange rate is like asking foxes for advice on how to reduce the rate of chicken disappearing from the farm… Which is typical of the clueless Ministry of Finance and CBN. They should know that the only way to reduce the gap between the official and black market/BDC rate is to remove the ban for importers of the 41 items to the interbank market. This is the single reason why the difference is so huge. Until then, they can keep talking, threatening, cajoling …. but there will be no change because the artificially created demand for forex will remain.

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