Achieving stable, strong and virile exchange rate in Nigeria would require full participation of Bureaux De Change (BDCs) in the retail segment of the forex exchange market and exchange rate stability, President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji (Dr) Aminu Gwadabe, has said.
Presenting a pathway to achieving stable exchange rate in Lagos yesterday, Gwadabe said Nigeria has under the current leadership at the Central Bank of Nigeria (CBN), all it takes to achieve a strong and stable exchange rate regime and build a highly liquid forex market that supports the domestic economy. He sexplained that the challenges confronting the nation’s forex market and depreciation of the naira require the support of Nigerians including the BDCs, which are licensed to play at the retail end of the forex market being fully involved to provide lasting solution to the ongoing volatility in exchange rate.
Gwadabe said the continuous depreciation of the naira in both official and parallel markets does not benefit the BDCs and the domestic economy, hence the need to reverse the trend and strengthen the local currency for maximum impact on the economy.
The naira on Tuesday crossed N1,100 to dollar mark at the parallel market even as it continues to weaken considerably at the official market due to persistent dollar scarcity and speculative activities of illegal forex dealers.
He said the several measures by the apex bank to bridge exchange rate gaps showed genuine intentions of the regulator to entrench exchange rate stability, but getting the BDCs involved in the solution recipe will bring the desired results of not only a highly liquid market, but stable rates.
Gwadabe said that like every other segment of the market, the illiquidity in the market remains a major concern to the BDC sector.
He said aside illiquidity in the market, the ABCON is not happy with the unlicensed forex dealers who are at the centre of speculative activities, and attracting negative image to the sub-sector.
He said ABCON can only continue to educate the general public against patronizing the illegal forex dealers because the suspension of the Self-Regulatory Organization status of ABCON makes it difficult for the group to directly sanction the illegal operators.
He said enforcement of regulatory sanctions against non-compliance with guidelines are expected to be prompt and stiff against erring members as a deterrent to others.
On recapitalisation, ABCON boss said BDCs business is not capital intensive as they do not take deposits or lend funds to customers. The operators are licensed to buy and sell forex at the retail end of the market to buyers, who already have their funds ready for the transaction.
This, he explained buttresses the fact that BDCs do not need more than the approved N35 million capital base to operate efficiently and profitability.
He said what BDCs need is consolidation through mergers of operators and not recapitalization of the industry. Recapitalisa, he said, may edge out professionals and highly experienced operators whose valued industry knowledge will help stabilise the market.
In terms of digitisation and the vision of the new cbn management on evidence base decision making,Gwadabe said CBN-licensed BDCs have digitized their operations to ensure that rendition of reports are done digitally on ABCON’s automation portal.
The BDCs now record their transactions on Amazon Web Service (AWS) online real time and extract daily reports for return rendition
Gwadabe said the ABCON recommended that the apex bank approve its overdue request that BDCs be made agents through which over $20 billion annual inflows from the diaspora enter the economy. Securing such regulatory approval will boost dollar liquidity and strengthen the naira.
“We at ABCON advise that BDCs should be allowed to access dollars or diaspora remittances through the autonomous forex windows like allowing operators to receive IMTOs proceeds, carrying out online dollar operations and Point of Sale (PoS) Agency, among others,” he said.
Gwadabe said the Diaspora remittances remain a low hanging fruits for the apex bank and tapping the full potentials would require creating multiple channels of inflows to make it easier for Nigerians in diaspora to send funds home.
He said other issues around training for BDCs operators and stronger regulatory oversights are key in getting the BDC sub-sector to position of strength and maximum value addition to the Nigerian forex market. “We therefore advise our members to avoid currency substitution, speculation as erring operators risk heavy loses from any illegal economic behavior,” he said.