The Association of Bureaux De Change Operators of Nigeria (ABCON) has urged the Central Bank of Nigeria (CBN) to abandon the official exchange rate and float the Naira amid the recent crash.
This was disclosed by the President of ABCON, Alhaji Aminu Gwadabe to the News Agency of Nigeria (NAN).
The exchange rate at the official market on Friday, 29th July 2022 closed at N429.00/$1 from N426.2/$1 seen in the previous trading session, while the exchange rate on the black market is trading at N720.
Due to the large astonishing gap between the official market rate and the black market rate, Gwadabe urged the CBN to abandon the official exchange rate and undertake a sustained injection of the dollar in the market to reverse the loss in the value of the naira at the parallel market.
What the ABCON is saying
He said, “It might sound counterintuitive but the way out of the current frenzy is to abolish the official fixed exchange rate and allow the Naira to float. CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin.”
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“Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira,” Gwadabe added.
According to Gwadabe, the CBN could gradually buy back the Dollars used in its intervention from the open market at a lower exchange rate for a reasonable profit.
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He contended that the next step would be to strengthen the Naira in the medium to long term, adding that fiscal and monetary policies should be aligned to stimulate the tradable sector.
“Any wonder why Ghana’s annual non-oil export is 13.1 billion dollars, while Nigeria’s is 1.3 billion dollars, We have a long way to go,” Gwadabe said.
He said that all the indices suggest that the Naira holds more of a downside potential than it does an upside because the present monetary and fiscal authorities will continue to tether in the zone of docility.
What you should know
- Since the central bank stopped selling FX to Bureau De Change operators in July 2021, the dollar shortage has pushed Naira to record lows in the parallel market. This move heightened the demand for dollars in Black markets where currencies are determined to demand and supply forces.
- Bureau De Change operators cited a lack of FX and a surge in demand for the recent uncontrolled uptrend recorded in the market. Meanwhile, some bank users have complained that they have not been able to access the funds in their domiciliary accounts due to a lack of liquidity.
- Nigeria’s foreign reserve continued on its downturn with a 0.07% decline to stand at $39.25 billion on Wednesday, 27th July 2022 compared to $39.27 recorded the previous day. Notably, the external reserve has dipped by $196.71 million in one week, following the recent volatility in the exchange rate markets.