ABCON advocates measures to curb naira depreciation, FX challenges

The Association of Bureaux De Change Operators of Nigeria (ABCON) has advocated measures to curb the continued depreciation of the naira.

The measures were contained in the ABCON Quarterly Economic Review for the third quarter of 2021.

ABCON noted that recent developments in the foreign exchange market have proven that the suspension of dollar sales to BDCs is not the solution to the continued depreciation of the naira in the parallel market.

It added that the continued depreciation of the naira has also proven that BDCs are indispensable in Nigeria’s context of the foreign exchange market.

To address the continued depreciation of the naira in the parallel market, ABCON called on the Central Bank of Nigeria (CBN) to restructure the BDC sub-sector.

It also called on the CBN to resume dollar sales to the public through BDCs especially in view of the failure of the intervention through Deposit Money Banks to bridge the gap between the official and parallel market exchange rates.

The Association stated: “Industrialists have reported increased scarcity of foreign exchange in the system since the stoppage of intervention to BDCs, which is an indication that irrespective of the anomaly observed in the operations of BDCs, part of the allocation to the sub-sector flows into the real sector.

“Thus, it is logical to consider restructuring BDC operations to weed out the dysfunctional units and operators bringing out the real outfits for operational efficiency. These can be achieved through the design of dynamic operational modalities of standard practices

“The refined outfits can effectively operate on independent transparent platforms dealing in autonomous funds in the economy. They should be permitted to operate as fully independent foreign exchange professionals under the best practices in international foreign exchange operations. Medium-scale dealers in foreign exchange should be permitted to operate a lower platform to the Investors and Exporters (I&E) market under transparent clearinghouse modalities.

“The market or platform will compete for funds in the global foreign exchange market thereby deriving a merger and stability in exchange rate in the economy.”

This is a basic solution to the divergent and multiple exchange rates regimes plaguing the Nigerian foreign exchange market for ages.”

ABCON also called on the CBN to investigate the actual causes of the depreciation since July 2nd when it suspended dollar sales to BDCs and why the Deposit Money Banks were unable to bridge the gap of supplying foreign exchange to satisfy the demand earlier fulfilled by BDCs.

The Association stated: “Why are the Money Deposit Banks unable to bridge the gap of supplying foreign exchange to satisfy the demand earlier fulfilled by BDCs? Believing that BDCs sold only Personal and Business Travel Allowances, which the banks are equally selling now.

“What were the actual causes of the depreciation from cN400 to cN500 per US dollar earlier in the year 2021 if discontinuing sales to BDCs did not stop the trend? OR could the alleged sharp practices of the BDCs be responsible for the continued depreciation of Naira in the parallel foreign exchange market after their suspension.

“If sharp practices of the BDCs were responsible for the poor policy performance of the apex bank, why has the market not responded to the policy since CBN discontinued sales to the sub-sector.”