Achieving a stable, strong, and virile exchange rate in Nigeria would require the full participation of Bureau De Change (BDCs) in the retail segment of the forex exchange market, according to the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji (Dr) Aminu Gwadabe.
Presenting a pathway to a stable exchange rate in Lagos, Gwadabe stated that Nigeria, under the current leadership at the Central Bank of Nigeria (CBN), has all it takes to achieve a strong and stable exchange rate and build a highly liquid forex market that supports the domestic economy.
He emphasised that the challenges facing the nation’s forex market and the depreciation of the naira require all hands to be on deck, and the BDCs, which are licenced to play in the retail end of the forex market, should be fully involved in providing a lasting solution to the ongoing exchange rate volatility.
Gwadabe pointed out that the continuous depreciation of the naira in both official and parallel markets does not benefit BDCs or the domestic economy. Therefore, steps should be taken to reverse this trend and strengthen the local currency for maximum impact on the economy.
The naira crossed the N1,100 to the dollar mark in the parallel market on Tuesday, while it continues to weaken considerably in the official market due to persistent dollar scarcity and the speculative activities of illegal forex dealers.
He acknowledged that the various measures taken by the apex bank to bridge exchange rate gaps showed the genuine intentions of the regulator to entrench exchange rate stability, but getting the BDCs involved in the solution recipe will bring the desired results of not only a highly liquid market but stable rates.
Gwadabe also addressed the issue of market illiquidity, which remains a major concern for the BDC sector. He stated that, aside from illiquidity in the market, ABCON is not happy with the unlicensed forex dealers who are at the centre of speculative activities and attracting a negative image to the sub-sector.
He said ABCON can only continue to educate the general public against patronising the illegal forex dealers because the suspension of the self-regulatory organisation status of ABCON makes it difficult for the group to directly sanction the illegal operators. He emphasized that enforcement of regulatory sanctions against non-compliance with guidelines is expected to be prompt and stiff against erring members as a deterrent to others.
Regarding recapitalization, the ABCON boss said BDCs’ business is not capital-intensive, as they do not take deposits or lend funds to customers. The operators are licenced to buy and sell forex at the retail end of the market to buyers who already have their funds ready for the transaction.
This, he explained, buttresses the fact that BDCs do not need more than the approved N35 million capital base to operate efficiently and profitably.
He said what BDCs need is consolidation through mergers of operators, not recapitalization of the industry. Recapitalization, he said, may edge out professionals and highly experienced operators whose valued industry knowledge will help stabilise the market.
In terms of digitisation and the vision of the new CBN management on evidence-based decision-making, Gwadabe said CBN-licensed BDCs have digitised their operations to ensure that reports are rendered digitally on ABCON’s automation portal.
The BDCs now record their transactions on Amazon Web Service (AWS) online in real-time and extract daily reports for return rendition.
Gwadabe said ABCON recommended that the apex bank approve its overdue request that BDCs be made agents through which over $20 billion in annual inflows from the diaspora enter the economy. Securing such regulatory approval will boost dollar liquidity and strengthen the naira.
“We at ABCON advise that BDCs should be allowed to access dollars or diaspora remittances through the autonomous forex windows, like allowing operators to receive IMTOs’ proceeds, carrying out online dollar operations, and acting as Point of Sale (PoS) agents, among others,” he said.
Gwadabe said diaspora remittances remain a low-hanging fruit for the apex bank, and tapping their full potential would require creating multiple channels of inflows to make it easier for Nigerians in the diaspora to send funds home.
He said other issues around training for BDC operators and stronger regulatory oversight are key to getting the BDC sub-sector to a position of strength and maximum value addition to the Nigerian forex market. “We, therefore, advise our members to avoid currency substitution and speculation, as erring operators risk heavy losses from any illegal economic behaviour,” he said.
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