Uneasy calm in currency market as ABCON raises alarm

The currency market is enveloped with uncomfortable atmosphere as the Association of Bureau De Change Operators of Nigeria (ABCON), has warned that currency speculators are in for a bad season as they stand to lose billions of Naira to the new Foreign Exchange (forex) policy of the Central Bank of Nigeria (CBN).

The association through its Acting President, Alhaji Aminu Gwadabe, also raised the alarm that the  Central Bank of Nigeria-licensed Bureaux De Changes (BDCs) would incur regulatory losses of N130 million from the CBN’s disparity in applicable exchange rates among players in the market.

Gwadabe told the Nigerian Tribune last week in Lagos that the public has refused to buy foreign exchange from BDCs for invisibles such as medicals, school fees, personal and business travels, at rates above N375 to the dollar, adding that the CBN had sold foreign exchange to Travelex and the commercial banks at same rates, while the BDCs are offered different rates and this could be used by speculators to destabilise the market.

“The CBN sells dollars to the BDCs at N381 and they are expected to sell at N399, while the CBN sells dollars to Travelex, also a BDC, and the banks at N315 and are expected to sell at N375.

“While Travelex and the banks are expected by a CBN circular to settle such transactions at a rate not exceeding 20 per cent above the interbank market rate, the BDCs only sell at five per cent margin.

“Twenty per cent profit margin from FOREX is the highest in the world.’’

According to Gwadabe, recent developments at the foreign exchange market have shown that if the CBN does not eliminate the disparity in rates, the BDCs will be technically hedged out of the market.

Gwadabe said hedging out about 3,200 CBN-licensed BDCs from the foreign exchange market would lead to over 30,000 job losses in an economy that was gradually recovering from recession.

On the other hand, the ABCON President warns that speculators’ fingers had been burnt due to the policy, and will continue as long as the apex bank is determined to carry on the battle of forex stability to the end.

“The speculators fingers are completely burnt. They are estimated to lose several billions of Naira,’’ Gwadabe said.

According to him, the new policy was a long awaited liberation the Naira needed to check speculators from manipulating the exchange rate for their selfish ends. The market he added, is already adjusting at a faster pace as the Naira continues to appreciate across board in all the major segments of the market.

According to the ABCON’s acting president, developments in the market have completely reduced or eliminated frivolous demand in the market which hitherto has been one of the major reasons for the weakness of the local currency.

Meanwhile, there have been high expectations among BDC operators that the CBN will  raise their weekly dollar supplies  from $8,000 to $15,000.

Gwadabe said that appreciation of the Naira to N385 per dollar in Abuja though a good development is causing panic among BDCs because the CBN presently sells dollars to BDCs at N381 per dollar, and expects them to sell to the public at N399 per dollar. He said the problem now is that customers are using the Abuja parallel market rate as reference for dollar purchase. “They insist they cannot buy at N400 per dollar when the dollar is going for N385 per dollar in Abuja,” he said. Explaining why the sharp difference between the Lagos and Abuja parallel market exchange rates, Gwadabe said “The Abuja market is smaller in terms of demand than the Lagos market, and it is also dominated by civil servants. Lagos is where most of the demand is.”

Continuing, told Nigerian Tribune for emphasis, that BDCs were not black market traders and are not competing with commercial banks in the sale of the proceeds of International Monetary Transfer Services Operators (IMTSOs) to end-users and that the directive did not provide a level playing ground for the banks and the BDCs to operate.

“This is a great source of worry to ABCON because BDCs are not meant to be in competition with the banks. We are supposed to provide complementary roles,” Gwadabe said.