Association of Bureaux De Change Operators of Nigeria (ABCON) has expressed its support for the Central Bank of Nigeria’s (CBN) recent directive that prohibits the use of Non-Export Domiciliary Account Collateral for securing naira loans.
This move, according to ABCON President, Dr Aminu Gwadabe, is anticipated to enhance dollar liquidity, aid in reserve accumulation, and fortify the financial services sector.
The CBN’s instruction to banks clearly states that collaterals for naira loans must not be denominated in foreign currency, except for Eurobonds issued by the Federal Government or guarantees from foreign banks, including Standby Letters of Credit.
Gwadabe highlighted the directive’s potential to mitigate the undue pressure exerted on the foreign exchange market by large businesses and manufacturers.
“The cessation of this detrimental practice is expected to not only increase dollar availability in the market, but also contribute to the growth of our foreign reserves,” Gwadabe stated.
He also recommended that the CBN review the foreign currency holding guidelines for non-oil export domiciliary account proceeds, suggesting a maximum holding period of 48 hours with a minimum balance requirement of $5,000 for individuals and $50,000 for companies, akin to the model in South Africa.
Highlighting the role of Bureaux De Change (BDCs) in the market, Gwadabe argued that despite misconceptions about their operations, BDCs serve as an effective market control mechanism.
