CBN’s FX Policy Unconventional, Says ABCON President
The foreign exchange policy of the Central Bank of Nigeria (CBN) is unconventional, frosted with administrative fiat, and berated of market fundamentals, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, has said.
Gwadabe, in a chat with InsideBusiness correspondent on Monday, added that the CBN Governor, Godwin Emefiele, as someone who is from the banking systems should know where the eggs rot.
He said, Emefiele “had tried to introduce many policies beyond conventional money supply to proactive paradigms though always with administrative fiat and berate of market fundamentals.”
According to him, the Naira-4-Dollar scheme of N5 bonus for every $1 diaspora remittances as well as the N65 rebate for every dollar of non-oil export proceeds and other incentives are commendable but need a total overhaul with stakeholders’ engagement.
“I am not a prophet of doom and student of continuing naira depreciation but except fundamental goodwill and courage is being demonstrated the naira will continue to suffer loss in exchange for the greenbacks,” Gwadabe maintained.
He recalled that when the apex bank decided to suspend sales of forex to Bureau De Change (BDCs) operators, in July 2021, the open market rate was about N501/$.
One year after, the naira to the dollar has depreciated to N720/$ with a lot of Nigerians not meeting their invisible transactions needs, the ABCON president lamented.
“The question on the lips of everyone is that are the banks not having the allocation for invisible transactions?”
While responding to a question on where the BDCs are sourcing forex, he said though that some members are lucky to be operating at the international airport and other off-table transactions, majority of the operators are out of business due to lack or total absence of alternative sources.
“A licensed BDCs in Nigeria cannot access oil proceeds, non-oil proceeds, and diaspora remittances.
“We need expansionary regulatory approvals on the scope of transactions and margin reviews,” Gwadabe said.
According to him, an average BDC operator licensed by CBN is comatose and heading for extinction. “I remember one of the MPC members did mention the policy is meant to extinguish BDCs.”
To strengthen the naira, Gwadabe believes it is to allow competition among stakeholders and engagements.
He said, “Naira is the most difficult currency to predict in the world because of its vulnerability to leadership corruption, lack of competitive space, and the prevalence of ungoverned players.”
Despite the suspension of FX sales to BDCs, Gwadabe hinted that the apex bank not only supervises the activities of the BDCs but has started nationwide training for the operators to expose them to the vulnerability of money laundering, terrorism financing, and financing of proliferation of mass weapons of destruction.
He noted that the next evaluation of the anti-money laundering world watchdog on Nigeria will be coming up next month, October.
“Despite Nigeria’s performance in theory and laws, our effectiveness is graded very poorly with certain negative perceptions for the entire financial system and the country,” he lamented.
Gwadabe also hinted that the apex bank has maintained that the suspension of FX sales to the BDCs does not lead to revocation of licenses as the operators are still under the purview of CBN regulations.
“However, the suspension has led to increasing practices of ungoverned space players and crunch liquidity of FX to the retail end of the market and the resultant exchange rate volatility.
“We in ABCON believed in self and regulatory reforms as the sine qua non to the lingering exchange rate volatility. ABCON has always been proactive in ensuring BDCs participate and comply with global practices.”
Gwadabe suggested that it is the right time for Nigeria to embrace the completion and laissez-faire model in its huge and sustainable diaspora remittances.
He urged the apex bank to leverage the capacity and skills of the BDCs operators and also reach out to them to enhance liquidity, and price discovery of the diaspora remittances.
“This agitation of stakeholders we will continue to advocate,” he said. “We urge the CBN to embrace our road map and create stakeholders engagement,” he said.
Gwadabe added that the diversion of the allocations of BDCs to the banks to enhance liquidity in the retail end of the market and price stability, was still a misnomer if the banks had performed the roles of CBN’s transmission mechanisms.
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