Market operators warn against currency speculation
Gap between official, parallel market widening
The Association of Bureaux De Change Operators of Nigeria (ABCON) has warned against foreign exchange speculation and other illegal activities that could affect the market negatively.
ABCON President, Dr. Aminu Gwadabe, said forex speculators are taking an extreme risk with their funds, as the Central Bank of Nigeria (CBN) has enough financial liquidity to defend the naira and close the huge differential between official and parallel market rates, which is up to N100.
The naira has depreciated to N480/$ to the dollar in the parallel market. Yet, the CBN official rate has remained at N379/$.
According to Gwadabe, with nearly $36 billion foreign reserves, the CBN has what it takes to meet the market demand and crash the black market rates, which would lead to huge losses by speculators.
When the apex intervened in the BDC market after a long break following the economic lockdown to contain the spread of the Coronavirus outbreak, black market operators recorded huge losses as they dumped the currency warehoused.
Gwadabe said a similar loss was imminent as the antics of speculation have reached their peak. He said the CBN Governor, Godwin Emefiele has continued to take the right steps to achieve exchange rate stability, ensuring that foreign exchange is made available to manufacturers and end-users who need funds for medical trips, school fees payment, travel allowances among others.
According to him, the funding of BDCs has also helped to deepen the forex market and reduce the level of scarcity that has triggered speculation.
The ABCON leader said exchange rate unification will further narrow the gap between official and parallel rates as being canvassed by the International Monetary Fund and the World Bank.
“I think the adjustment of the official foreign exchange rate from N306/$ to N379/$ is in line with market reality. It has also helped to narrow the official-parallel market rate gap that formed the basis of ridiculous speculations among unpatriotic dealers,” he said.
Gwadabe also advised the Federal Government to enhance security surveillance at the nation’s land borders to checkmate illegal foreign currency cash transactions while calling for the raising of BDC liquidity ratios to discourage currency hoarding.
He said ABCON executives would from this week begin enforcement of regulatory compliance of its members in BDC designated offices nationwide. He noted that the association would continue to enlighten and educate its members on the need to continue to trade within the official BDC selling rates set by the apex bank.
“It is time to deepen forex market by making BDCs agents of International Money Transfer Operators (IMTOs) help attract more dollars to the economy and promote more diaspora remittances,” he canvassed.
Gwadabe said ABCON has been working with industry consultants in designing and developing robust automation and deployment of technology that would enable BDCs to fit into the IMTOs role in deepening dollar liquidity in the economy.