ABCON sees further naira recovery on CBN recall of BDCs to FX market

Business a.m.

The Association of Bureaux de Change Operators of Nigeria (ABCON) sees the recovery of the Naira continuing on the back of the recall by the Central Bank of Nigeria of their members to the mainstream of Nigeria’s foreign exchange market. 

The association, therefore, commended the CBN for this decision, which it said has been a significant factor in the current stability of the naira exchange rate. 

In a statement released in Lagos by Aminu Gwadabe, the ABCON president, the association lauded the CBN’s decision to recall BDCs into the mainstream FX market, which has helped to increase dollar liquidity at the retail end of the market. ABCON also cited other factors that have contributed to the improved forex market, such as the CBN’s monetary policy tightening, the increase in interest rates, and the government’s clearance of a $7 billion backlog of forex commitments

Gwadabe therefore expressed his appreciation to the Cardoso-led CBN and related agencies for recognising the BDCs as a vital component of the foreign exchange market and a key mechanism for the transmission of exchange rates. 

He said: “The reconsideration of the BDCs into the mainstream foreign exchange market has not only demystified illegal economic behaviours such as  hoarding, rent seeking, round tripping and FX holding position, but also led to the emergence of  exchange rate convergence.”

According to Gwadabe, the stability in the exchange rate has already begun to have a positive impact on the prices of goods and services. For example, the cost of international school fees has decreased by 15 percent, the cost of medical tourism has decreased by 20 percent, and the cost of air travel, both locally and internationally, has decreased by 25 per cent. 

Gwadabe also noted that the recent developments in the foreign exchange market have begun to have a dampening effect on inflation, as the prices of many essential goods and services are beginning to decrease. He added that one of the most notable effects of the improved exchange rate stability has been a resurgence of confidence in the naira, which has helped to combat the problem of currency substitution. 

Describing the ongoing market development as revolutionary, the ABCON president  said stable naira will attract more foreign portfolio inflows to the economy, while observing that  the naira has appreciated from February low of N1,915/$ to N1,255/$ representing N660 gain, which is significant by all measures.

Gwadabe underscored the significance of the CBN’s recognition of the BDCs’ role in achieving a stable exchange rate under Cardoso’s leadership. He noted further that the previous practice of Nigerians who reside in Dubai bringing dollars back home to sell at high rates has come to an end. 

Going forward, the ABCON president said that prospects for forex earnings are promising, with foreign portfolio investments on the rise and over $1.5 billion inflows a few days after the Monetary Policy Committee raised interest rate by 200 basis points. He added that  increases in foreign exchange inflows into the economy through the CBN’s monetary instruments is helping to boost foreign reserve accretion and gives the apex bank the necessary power to continue to defend the local currency.

”It is our view that the collaboration between the BDCs, CBN , National Security Adviser, 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. Overall, the combination of these actions have induced an atmosphere of public calmness, confidence, hopes and liquidity in the markets.

We therefore call on the CBN to continue to calibrate the existing relationship between the BDCs and the apex bank to sustain the success story,” he advised.

Regarding the recent reforms in the financial industry, Gwadabe reiterated the ABCON’s commitment to collaborating with the CBN to ensure that all of its members are involved in and benefit from the reforms. This, he said, would help to safeguard investments, harness the skills of BDC operators, and create jobs in the financial services sector.