Currency traders under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON) have warned that forex speculators will resist the rapid appreciation of the naira to cover their losses.
They, however, urged the Central Bank of Nigeria (CBN) to keep the momentum and discourage the illegal act of speculation and currency substitution.
This was made known by the President of ABCON, Aminu Gwadebe, during a chat with Nairametrics, as he urged the CBN to engage the BDC operators where volatility is pervasive.
The comments by Gwadebe followed the significant strengthening of the naira at both the official and parallel markets after 3 consecutive days of appreciation since the apex bank introduced the Enhanced Foreign Exchange Market System (EFEMS).
The official market experienced rapid gains in the exchange rate, while the parallel market, where forex is traded unofficially, presented an even more unsettling scenario for speculators. The naira was gaining faster than they could sell.
Demand is very weak
The ABCON boss said the huge forex supply is struggling to cope with very weak demand stating that the development in the market calls for circumspection.
Gwadebe said, ‘’Market is dull. Demand is very weak and supply very huge. The development in the market calls for circumspection. Already, there is a huge loss on speculators and currency substitutions.
‘’I can see speculators resisting the appreciation to cover their losses and the CBN needs to keep the momentum on ensuring hopes. Sometimes I wonder if the inorganic appreciation of the naira falls within the CBN templets.
The CBN should first maintain the momentum and discourage illegal behaviours of speculations and currency substitution and engage the BDCs where volatility is pervasive.’’
CBN has enough liquidity to control the market
When asked if the apex bank has enough foreign exchange to sustain its intervention in the market, Gwadebe hinted that the CBN has enough liquidity to fight and control the market with a lot of the inflows coming into the market.
He said, ‘’The CBN has enough liquidity to fight and control the market considering a lot of all inflows sources coming into the market. The EFEMS market should not be using aggregators for exchange rates, instead, all players should post their buying and selling rates to the public. It should be access to online real time not limited to only the existing players.
‘’It should be democratized, opened and accountable to the public. Their new exchange rate platform only aggregates. The CBN should encourage our online real-time where various players will post their offer and bid rates.’’
The EFEM platform which was launched on December 2, 2024, addresses long-standing issues of market opacity and inefficiency by facilitating smooth trading and consistency among participants.
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor. This has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
Fear of the unknown
Gwadebe, who acknowledged fear of the unknown with the take-off of the EFEMS platform, expressed the commitment of licensed BDC operators to the ongoing appreciation of the naira as it impacts positively on both business operations and the Nigerian economy as a whole.
He said, ‘’The kick-off of trading activities at EFEMS PLATFORM has ushered in transparency and enhanced regulatory oversight. We are expressing our commitment to continuing naira appreciation as it positively impacts not only our business operations but to the Nigerian economy in general.
‘’I am happy that the CBN has traced the mouth of the thread and urging them to continue to ensure effective win-win policies that are inclusive and collaborative.
‘’There are huge supplies into the market from various market participants as there is the fear of the unknown with the take-off of the EFEMS PLATFORM. We observed huge volumes of dollar supplies in the market.
‘’Also, the non-availability of Naira cash is constraining Naira/Dollars substitution. Above all, the increasing confidence of the public and operators in the CBN monetary policies is also contributing to the positive fortune of the local currency.’’
Backstory
The CBN on November 29, 2024, released revised guidelines for the Nigeria Foreign Exchange Market (NFEM), signaling a major shake-up in the country’s FX operations.
The update contained in a circular consolidates all FX windows, redefines the roles of market participants, and introduces stricter compliance and transparency measures.
- This latest move is part of the apex bank’s efforts to address long-standing inefficiencies in the FX market while creating a transparent, well-regulated system.
- A major focus of the revised guidelines requires that all FX transactions be priced through the Electronic Foreign Exchange Matching System (EFEMS), a centralized platform that will also publish daily FX rates for public access.
- The platform replaces the fragmented system of multiple windows, such as the Investors & Exporters (I&E) FX Window, SME Window, and Invisible Window.
- The CBN had also in the guideline, permitted licensed BDC operators to purchase foreign exchange directly from Authorized Dealers.
- This is part of the central bank’s move aimed at streamlining Nigeria’s foreign exchange (FX) market enabling the naira to reflect its true value.
This measure aims to balance market accessibility with effective monitoring and control.
The BDC segment, which had previously been excluded from certain FX market activities, is now positioned to play a more active role in meeting retail FX demand.
