ABCON explains reasons for naira’s recovery

The Association of Bureau de Change Operators of Nigeria (ABCON) has identified the ongoing recovery and stability of the naira on the decision of the Central Bank of Nigeria (CBN) to recall Bureau De Change (BDCs) operators into the mainstream FX market.

The association also attributed the naira‘s recovery to the recent monetary policy tightening that led to interest rate hike and more investment in government instruments and clearance of $7 billion forex backlog forward commitments.

ABCON President, Dr. Aminu Gwadabe made this known in a statement on Sunday while expressing ABCON’s gratitude to the Cardoso-led CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate transmission mechanism in forex management.

Ripples Nigeria reports that the apex bank recently sold $10,000 to all eligible Bureau De Change (BDC) operators in the country at the rate of N1,251/$1 with an instruction not to sell above N1,269/$1.

The domestic currency appreciated significantly against the US dollar throughout March 2024, marking a major turnaround for Nigeria’s exchange rate policy.

Official figures indicate that the Naira closed the month at N1309/$1 on the last trading day, up from N1595.11/$1 at the end of February 2024.

Similarly, on the parallel window, the naira traded at N1,255/$1 on Saturday, even lower than N1,269.765 rates BDCs were advised to sell.

Reacting to these, Gwadabe stated that “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.”

Gwadabe said that the stability in the exchange rate has already started to have a positive impact on the prices of goods and services.

For instance, the price for international school fees has dropped by 15 per cent; cost of medical tourism has reduced by 20 per cent and prices of air fares for local and international trips dipped by 25 per cent.

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He said: “The current developments in the foreign exchange market have started reigning in inflation as prices of most necessities are becoming relatively lower in the market. On a more serious note, the positive impacts include also heightening confidence of the public in the local currency as it eliminates currency substitution behavior which hitherto had been adding pressure on our local currency.”

Gwadabe said the success story is unending as naira traded at N1,255/$ on Saturday, even lower than N1,269.765 rates BDCs were advised to sell.

Describing the ongoing market development as revolutionary, Gwadabe said stable naira will attract more foreign portfolio inflows to the economy.

He said the naira has appreciated from February low of N1,915/$ to N1,255/$ representing N660 gain, which is significant by all measures.

He said the gains of the CBN under Cardoso to recognise the power of BDCs in securing stable exchange rate cannot be over emphasised.

He also said that previous practice where Nigerians based in Dubai bring dollars home to sell at high rates has ceased, after the rapid recovery of the naira against dollar.

Going forward, he said that prospects for forex earnings are promising, with foreign portfolio investments on the rise and over $1.5 billion inflows few days after the Monetary Policy Committee (MPC) raised interest rate by 200 basis points.

He said 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 has 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.

On the recent reforms in the financial industry, the ABCON chief reiterated the resolve of ABCON to continually collaborate with the CBN in carrying all its members along in achieving a win-win situation. This is expected to help in safeguarding investments, harnessing skills of BDC operators and boosting employment within the financial services sector.

By: Babajide Okeowo

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