Bureau De Change (BDC) operators have attributed the recent crash of the naira in the foreign exchange market to the huge demand for forex due to the windfall from some contractual payments and releases by some Federal Government agencies.
This was made known by the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, during an exclusive chat with Nairametrics, where he admitted that the forex market is witnessing some unprecedented attacks.
This is coming after the recent strong performance of the naira with the local currency trading around the N1,500 to a dollar mark at both the official and unofficial market as a result of the policies of the Central Bank of Nigeria (CBN).
Gwadebe noted that this unfortunate development has once again given credence to the need for regulators to be consistent in the implementation of reforms and policies in a volatile forex market.
Current forex shock is fictitious, discretionary
The ABCON boss said the licensed currency traders will continue to inform the public that these occasional shocks in the foreign exchange market are fictitious, discretionary and a burble that will burst.
He also noted that the CBN must ensure the harnessing and coordination of forex supplies to the critical retail end of the market as well as track speculation, currency substitution and hoarding activities.
Gwadebe said, ‘’There was a shock yesterday (Friday) as the market witnessed unprecedented attack on the naira as the naira stability and appreciation regressed sharply with over N70/$ loss from high of N1503/$ to a low of N1575/$ just in a jiffy.
‘’Our findings revealed a lot of the demands came from the windfall of some contractual payments and releases. This unfortunate development underscored the regulator’s need for consistency in implementation of reform policies in a volatile forex market.
‘’While we will continue to communicate to the public that the seldom shock is fictitious, discretionary and a burble that will burst, it is also germane for the CBN to ensure the harnessing and coordination of supplies to the critical retail end market and to continue to mull speculation, currency substitution and hoarding activities.
‘’The achievements being recorded should not be allowed to be bastardized by mere emotional behaviours and market indiscipline.’’
BDC window should share from IMTOs proceeds
Gwadede said the apex bank should revisit its earlier prudential percentage targeting a fraction of the International Money Transfer Operators (IMTOs) proceeds received by the banks and Fintechs to the BDC window.
He said, ‘’The CBN should revisit their prudential percentage targeting on a fraction of IMTOs proceeds received by banks and fintech to the BDC window.
‘’The fiscal authorities should also devise a means of making their contractual obligations payments in instruments rather than cash payments to the beneficiaries of such payments to put a wage on a sudden naira to dollars substitution.
‘’While the mandate of the central bank is to ensure price stabilization, the fiscal policies target growth and we are witnessing a greater alignment of the two.
‘’The only advice I have is the enhancement of security and intelligence financial reporting to monitor fictitious transactions and unearned income, putting pressure on the exchange rate.’’
What you should know
The naira had in the past week reversed some of the gains it had made in recent times as it depreciated against the US dollar at both the parallel and official markets.
- At the close of trading in the past week, the naira weakened by 1.66% week-on-week, closing at N1,517.24/dollar from N1,492.49/dollar the previous week at the official market. At the parallel market, a similar trend was observed with the naira easing to an average of N1,520/dollar, reflecting a gradual uptick in demand for the greenback.
- The initial strong performance of the naira had put currency speculators on edge as they became afraid of their investments being wiped out.
- The CBN had recently taken several measures to tackle the volatility in the foreign exchange market, which the speculators usually capitalize on to put pressure on the naira.
Recall that on January 28, the apex bank launched the Nigeria foreign exchange code to promote transparency, accountability and ethical conduct in the country’s foreign exchange market.
