The new flexible exchange rate policy is expected to start fully on Monday the 20th of June 2016. It is expected that the exchange rate will be market driven with the price at the end of the day determined fully by market forces.
As investors locally and abroad load the new foreign exchange regime, it appears not every one is entirely happy with all aspect of the new policy. An example, is the President of the Association of Bureau De Change Operators of Nigeria “ABCON”, Mr Muhammed Gwadabe.
Mr Gwadabe was not particularly happy with the “exclusive club” created by the CBN known as the FXPDs who are expected to be the main buyers and sellers of forex at the interbank market.
“I hope this CBN forex policy will not be like medicine after death because we would have done this long ago when the CBN had enough liquidity to do the exercise.
“And so coming this late, I hope it will not be an opportunity given to a few people in the financial sector because in the past we saw how this kind of opportunity was given to banks and how they behaved against the objective of that policy.
“Even the criteria to becoming a dealer are very stringent and cumbersome. How many financial institutions do you think can meet those criteria? There are just very few of them.”
He also contends that there are aspects of the policy that might not work
“It’s an objective that is laudable and at will inject a lot of liquidity into the system but some of the tenets of the policy in terms of the new products introduced such as futures, spots and forwards contracts are for advanced economies that we lack the infrastructure to implement here in Nigeria,”
Expectedly a lot of market participants won’t be happy with this new policy considering its implications for the future of their businesses. The critical thing is that it is better than what we previously had and as such will have to be accepted regardless of its shortcomings. BDC’s have for decades in conjunction with rogue commercial banks, exploited the weaknesses inherent in our forex regime.