ABCON promises cooperation with CBN

Association of Bureaux De Change Operators of Nigeria (ABCON) has promised to cooperate with the Central Bank of Nigeria in its efforts to sanitise the foreign exchange (FX) market.

ABCON President, Aminu Gwadabe, gave this assurance in an interaction with the Nigerian Tribune.

According to Gwadabe, “having an effective and efficient FX system is in the best interest of the whole country.”

Gwadabe, who noted that most members of ABCON are law-abiding, said the association was ready to work with the CBN to flush out the few bad eggs in the market to have a virile and stable exchange rate.

The ABCON President said, “Our association has always worked with the CBN to ensure proper working of the FX market and in line with this principle, we will engage with the apex bank to address and resolve all the issues that led to the CBN action, including identification and sanctioning of erring BDCs, where necessary.

“In addition to this, and in view of the fact that BDCs have been very effective in ensuring stable exchange rate, ABCON will work with relevant stakeholders including law enforcement agencies to develop a National BDC Policy with the aim of enhancing the contribution of the BDC subsector to the nation’s economy.”

Gwadabe, in his reaction to the decision of the CBN to stop the sale of dollars to BDCs, said while access to dollars from the apex bank had been helpful to ABCON members in meeting their customers’ forex needs, the CBN’s decision would not hinder them from rendering services to their customers.

According to him, “BDCs are licensed to provide retail FX services, including buying from the public and also selling to end-users for allowable transactions namely Personal Travel Allowance (PTA), Business Travel Allowance (BTA), payment of medical and school fees.

“While dollar sale from CBN had helped in enhancing supply, the fact remains that BDCs are empowered to source FX from other sources and also to provide various services to members of the public.”

The ABCON President, therefore, called on the CBN governor, Mr Godwin Emefiele, to involve BDCs in Diaspora remittances for the benefit of the country.

According to him, globally, BDCs remain one of the channels through which the Diaspora remittances get into countries.

He said that BDCs, being at the retail end of the forex market, are at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy and deepening of the forex subsector of the economy by their involvement in Diaspora remittances.

The ABCON chief said Nigeria is in the league of a few countries such as Pakistan, Canada, America, Australia and Vietnam that attract huge funds from migrant workers.

“Nigeria is on the side of those that have many migrant workers across the world, and therefore earn foreign currencies they want to remit home. But there is a huge problem that limits the funds from getting home.” Gwadabe said.

Findings have shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year. Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into the country is arguably higher. The estimation is that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2021, 2022 and 2023 respectively.

Gwadabe said Diaspora remittances are a cheap source of fund, because they are not to be paid back with interest but go directly into the construction of houses, payment of school fees, medicals and a lot of things that are adding value to the economy.

“BDCs are supposed to buy from travelers coming into Nigeria, whether they are foreigners or they are Nigerians who did some things offshore, and were able to make some money, and brought back those foreign currencies.

“BDCs are also expected to operate a two-way rate, depending on the need of the customer, whether they are buying or selling. The operators are also expected to be in tune with market dynamics, be able to fix their own rate within the recommended commission rate in such a way that is competitive in that market,” Gwadabe said.

According to the ABCON President, Nigeria, being a net importer, brings huge pressure on the FX market. “And like we have also argued overtime, the major worry for the CBN or anyone considering the management of the FX market is the premium.”

Premium is the difference between the official rate of the FX and the rates in other segments of the FX market. The other segments comprise the parallel market and the BDCs. In the past, there were export proceeds as well as other sources of FX.

Gwadabe added, “The BDCs have for years supported Nigeria’s growth agenda and CBN’s commitment to exchange rate stability. To continue to play these roles creditably, the BDC industry needs improved access to forex.

“ABCON believes the success of BDCs goes beyond favourable rates but access to multiple streams of forex earnings to deepen the market, keep the naira stable and boost BDCs operations.

“Making BDCs one of the channels through which Diaspora remittances get into the economy will give depth to forex market and boost BDCs operations.

“Diaspora remittances to Nigeria, now at $23 billion annually, remain a reliable source of forex to the domestic economy and that is why over 5,500 CBN -licensed BDCs should come to mind.”

Corroborating the ABCON President’s position, renowned economist and chief consultant at B. Adedipe Associates Limited, Dr Biodun Adedipe, in a media report, explained that if Nigeria is able to manage Diaspora remittances effectively, it would add 0.4 per cent to GDP growth annually.

Adedipe said that a lot of the remittances don’t come into the FX market in Nigeria. The receiver gets the naira equivalent of the fund even when the funds never got to Nigeria, so denying Nigeria the full benefit of Diaspora remittances.

He said, “So, what then happens is that instead of bringing it into the FX market in Nigeria, they keep it outside. That also becomes a leg that supports speculations. I believe that is part of the reason the CBN introduced the N5 for $1 incentive. The idea now is to see if the country can harness most of the remittances.

“That now is a policy I think we need to interrogate more. How can we make it more attractive for those foreign currencies generated by migrant Nigerian workers to be remitted home, and become a part of our national supply to our market here? That now is a space for the BDCs.”

Analysts are of the view that what is needed is implementation of laws that stipulated that oil companies and other multinational companies bring dollars into the economy instead of keeping them in their home countries. This will ensure that what is kept outside the market   would come into Nigeria to boost supply.

Gwadabe explained that Diaspora remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. The remittances cash and non-cash items that flow through normal channels such as electronic wire, or through informal channels, such as money or goods carried across borders adding that Nigeria can cover a large part of capital flow gaps through remittances from its citizens in Diaspora using the BDCs.

“Nigerian BDC operators have also identified with the immense opportunities presented by Diaspora remittances and want to play greater role in attracting more foreign capital into the economy. Reason being that remittances are known to help poor recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth,” Gwadabe said.

Stressing why BDCs deserve a look-in in the management of Diaspora remittances, Gwadabe said financial institutions’ long procedures and complicated forms, among others show that BDCs are needed to deepen the market.

“The BDC segment of the market operates in a simple manner while remaining closer to the people needing the remitted funds.

“BDCs buy foreign currency from remittance recipients and sell it to Nigerians who want to travel abroad. The reason for establishing these institutions in 1989 was to broaden the forex market and improve accessibility to hard currency. The CBN supervises and issues operational guidelines for BDCs. In March 2006, Nigeria had 293 licensed BDCs which have risen to over 5,500 operators today. This development means that BDCs are willing and ready to do the remittance business,” Gwadabe said.

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