The focus of the meeting between the Central Bank of Nigeria (CBN) and the Bureau De Change (BDC) operators last week was on ways to improve liquidity and to reduce the huge spread between the inter-bank and parallel market rates.
Part of the outcome of that meeting was an agreement on uniform exchange rate for the retail currency traders.
The road to exchange rate stability has been rough and rigorous. With the drop in crude oil prices and foreign reserves comes the depreciation of the naira at both official and parallel markets. To achieve fair pricing and stability for the naira, the Association of Bureaux De Change Operators of Nigeria (ABCON) at a media forum it organised for Business Editors in Lagos, launched a Uniform Weekly Exchange Rate for Licensed Bureaux De Change portal to enforce same-rate for operators. Stakeholders have applauded ABCON’s consistent support for the Central Bank of Nigeria’s (CBN’s) policies and ongoing plans to boost public confidence in registered BDCs.
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, ABCON, which is the umbrella body for all CBN licensed BDCs, on Tuesday, lunched the Uniform Weekly Exchange Rate portal for Licensed BDCs. The portal was meant to enable BDCs achieve same exchange rate for the naira against the dollar across all licensed operators.
Aminu Gwadabe, ABCON President, who launched the portal at the maiden Business Editors of Print, Electronic Media and Wire Services, held last week in Lagos, said it will bring exchange rate convergence, eradicate currency speculation and ensure speedy recovery for the naira against the dollar. He said such feats are in line with CBN Governor, Godwin Emefiele’s plan to stabilize the naira and boost investors’ confidence in the economy.
According to Gwadabe, 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.
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 will 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.
Gwadabe said that CBN implements between N500, 000 to N2 million fines against BDCs that violate regulatory policies, and such operators may also face license suspension.
He called on the media to support ABCON’s determination to highlight positive rates development in the market through the BDCs Weekly Rate. “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 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.
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 will 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 N305. The BDCs will initially quote a rate of N399, Gwadabe said.
The ABCON chief said there was need to disregard the parallel market rates as they were not recognised by law while raising hope that exchange rate will continue to improve in the course of the year despite the challenges faced in the forex market.
Richard Obire, former executive director, Keystone Bank, 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 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.
Mustapha Suberu, associate Research, Eczellon Capital Limited, 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.
Ike Chioke, managing director, Afrinvest West Africa, 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 asides from oil receipts, the development of the agricultural sector will 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.
Nigerians in Diaspora had in 2015, sent home $21 billion which boosted the local forex market in 2016, figures released by Senior Special Assistant to the President on Foreign Affairs and Diaspora Matters, Abike Dabiri-Erewa, showed.
Dabiri-Erewa said, “In 2016 they remitted $35 billion which is higher than what was remitted in 2015. This remittance by Nigerians living abroad is the highest in Africa and the third largest in the world.”
But Gwadabe disclosed that less than five per cent of the 2016 Diaspora funds were captured officially by the CBN because of exchange rate divergence, which discourage Nigerians in Diaspora from sending their funds home through official channels. He said that harmonisation of the multiple exchange rates in the country, will make the rate for Diaspora remittances attractive to Nigerians in Diaspora.