The Association of Bureau De Change Operators of Nigeria (ABCON) has explained how to stem the tide and subsequently crash the rising exchange rate.
The association revealed that the reopening of the BDC window for foreign exchange, among others, would crash the prevailing spike in the exchange rate.
The disclosure was made by the President of ABCON, Alhaji Aminu Gwadabe, during his interaction with the News Agency of Nigeria (NAN) on Sunday in Lagos.
Gwadebe said, “The immediate thing to be done to crash the rate is the reopening of the BDC window for school fees payments pending when the international Air travels resumes.”
Gwadabe pointed out that BDCs have always been the medium and bridge for availability of liquidity in the retail end of the foreign exchange market.
The ABCON chief noted that they had always provided some level of exchange rate stability in the forex market due to its proximity of BDCs to genuine FX end users.
He said, “The germane role of BDCs is bridging the gap between the official rates and the parallel market rates, which was achieved from early 2017 to early 2020.’’
While appreciating efforts by the CBN in ensuring stability in the exchange rate, ABCON said that the factoring of BDCs into the FMDQ floor and Diaspora remittances agencies would ensure long term exchange rate stability in the economy.
The volatility of the foreign exchange market is primarily due to the crash in crude oil prices (which is about 90% of the country’s foreign exchange earnings) and triggered by the coronavirus pandemic.
The low forex earnings have negatively affecting the Central Bank of Nigeria’s capacity to intervene in the foreign exchange market.
Diaspora remittances before the COVID-19 pandemic had also always helped in boosting liquidity at the foreign exchange market, had been greatly hampered due to global lockdown and restrictions due to the pandemic.
A World Bank report has projected that remittances to Nigeria, Egypt, Senegal and other Low and Middle-income Countries would drop sharply by 19.7 per cent to $445 billion in 2020 due to the economic crisis induced by the COVID-19 pandemic and lockdown.
The report noted that the decline would be the sharpest in recent history and was largely due to a fall in the wages and employment of migrant workers that were more vulnerable to loss of jobs and wages during an economic crisis in a host country.
Nairametrics had reported that the CBN had suspended indefinitely the sales of foreign exchange to the BDC operators in March following the shutdown of the airports due to outbreak of the coronavirus pandemic.
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The suspension was also part of the recommendation by ABCON to the apex bank as part of the measure to contain the spread of the virus.
However, in April the apex bank resumed sales of forex to only the commercial banks to SMES for essential imports and school fees for foreign students