For the first time in several months, officials of the Central Bank of Nigeria (CBN), Department of State Service (DSS), the Police and over 3,000 directors of Bureaux de Change (BDC) operators found themselves under one roof.
The emergency meeting, organised at the instance of the Association of Bureaux De Change Operators of Nigeria (ABCON), in Lagos, last week, was focused on how to strengthen the naira against world currencies, especially the dollar. It had the theme: “Role of BDCs in Price Stability- Realities and Compliance.”
The directors were advised on the need to follow sound corporate governance practices and take direct charge of their businesses, as they will be liable for any breach of CBN’s operating guidelines.
But as a show of innocence and commitment, the participants condemned the role of foreign exchange (forex) speculators in naira crisis and agreed to tackle the menace headlong to save the local currency from further depreciation.
The naira, at the weekend exchanged for N410/$ in the parallel market despite improved funding, which earlier helped to strengthen it to $380/$ in the last few weeks. The naira opened last year at N197/$ in the official market, and is today, the official rate is at N306.05/$.
The ABCON President, Alhaji Aminu Gwadabe, in his opening remarks, said CBN was determined to raise liquidity in the forex market provided the BDCs operate within set guidelines.
“The CBN has assured us that it will continue to inject more liquidity in the forex market, but BDC operators must shun speculations and other malpractices. We are expected to comply with the Know Your Customer –KYC directive of the CBN. Stiff sanctions await any operator that breaches the CBN’s set rules,” he said.
Official-Parallel market Gap
Gwadabe said BDCs are better positioned in networking, convenient and more effective than the conventional banks in the elimination of rates disparity.
Urging the directors to help CBN reduce the gap between the official and parallel market rates, he said: “As a Nigeria, anytime I see the gap increasing, I become concerned. These gaps are created by currency speculators’ compromise. Speculators are the biggest challenge facing the naira.
“Speculation creates inflation, and the funds made through illegal means will also be spent on the problems they have created. Anytime the naira weakens, the economy suffers and there will be job losses and rise in crime rate.
“ABCON will continue to update all directors on CBN’s and other regulatory agencies’ forex sale requirements. We have a duty to reverse the negative perception many stakeholders’ have on our operations by complying with regulatory guidelines,” he said.
Gwadabe said the BDCs are in the watch list of the International Monetary Fund (IMF), World Bank and United States of America because of the critical role they play in economies of nations and cited cases where the BDC operators, had in the past, helped the CBN to strengthen the naira.
“We saw the naira appreciate from N520/$ in late January to about N380/$ after the CBN resumed sale of forex to BDCs. That was what everyone needed to know that BDCs have major role to play in naira’s stability. We have chosen to support the CBN and be part of the positive story surrounding the naira. We are happy that our contributions are paying off,” he said.
South West Zonal Chairman, ABCON, Taiwo Ebenezer, said BDC operators are willing and ready to get information that will improve their business and economy.
He said the overall interest of BDCs is to improve the status of the naira, because the decline in value of the naira leads to higher inflation.
Ebenezer however, urged the CBN to take steps that will ensure that only BDCs sell Personal Travel Allowances (PTAs) and Business Travel Allowances (BTAs).
He said: “If the BTAs, PTAs, and tuition are left in the hands of BDCs, we will be held responsible for any abuse. But today, BDCs are not the only players in the market as the banks also operate. It is important to leave this segment of the forex market entirely for BDCs,” he advised.
One of the BDC operators, Folashade Adebayo, said all operators should unite against the forex speculators. “The speculators are giving us bad name and killing the naira. Let’s unite and chase them out of the market and save the naira,” she said.
Continuing, she said: “The challenge is how do we ensure that when speculators buy from us, they do not go to the back and sell to parallel market operators? We must devise means to stop them before they stop us,” she added.
Another BDC operator, Tony Emeka, praised ABCON leadership under Gwadabe for constructively engaging the CBN and helping to raise weekly allocations from $8,000 to $20,000 even as the volume is expected to hit $40,000 in the coming weeks.
“It is not a simple task. ABCON has made us proud, and we have confidence in this leadership. We also want ABCON to engage CBN to review transaction margin. We need more dollar allocations from the CBN to force rates down,” he said.
Equally, representatives of the CBN, DSS, and Police agreed that there was need for all stakeholders to stop forex speculators from destroying the naira.
But Gwadabe noted that ABCON had reported to the CBN the need to increase commission on transactions.
“The CBN has been informed on the need to review the margin upwards. The margin is small, and in many climes, it is 10 per cent. We want the CBN to review the margin to N10 per dollar. We have told the CBN that the margin is small,” he said.
He said that BDCs operators under his leadership will continue to show that there is big difference between CBN-licenced operators and parallel market operators.
According to him, fall in crude oil prices and exit of foreign investors, triggered drop in dollar inflows and adversely affected naira’s value.
Building strong buffers
The ABCON boss called on Nigeria to build strong buffers that would protect it in times of crisis. “The United Arab Emirates has over $400 billion in their reserves, and that is a very big buffer for them as it protects their local currency at any given time.
“The working of the Lebanon economy is highly dependent on the activities of BDCs and these have shown how important the BDCs are to every economy including Nigeria.”
Gwadabe, who spoke on the theme: Role of BDCs in Price Stability- Realities and Compliance, said the BDCs will continue to support CBN’s exchange rate stability objective and achieve convergence of the official and parallel market rates. “We want BDC directors to know the gains of price stability, rate harmonisation and regulatory compliance,” he said.
Speaking further on exchange rate stability and pricing, he said BDCs are able to do more business when the exchange rate is stable and relatively close to the official exchange rate and so, will do everything within its powers to support CBN’s drive for exchange rate stability.
Gwadabe said the BDC directors are the owners of the business, and should understand that they carry corporate governance burden, and will directly face sanctions when their operations run contrary to CBN’s guidelines.
He said ABCON has a zero tolerance for non-compliance with regulatory requirement and unethical conduct amongst its members. It also created the office of Compliance Officer at its National Secretariat and in all its zonal offices to discipline non-complainant operators.
“We want the BDC directors to fully take charge of their businesses, because they will be punished if anything goes wrong. We also want the public to know that BDCs are not criminals, but remain critical partner of the CBN in ensuring that price and exchange rate stability are achieved,” he said.
He praised the CBN for giving each BDC $20,000 weekly and is confident that the apex bank will raise the allocations to $40,000 in the coming weeks and urged the CBN to continue to take steps that would help bring more foreign investors to the economy.
He disclosed that the CBN was ready to further raise weekly forex sales volume and commission on transactions to BDCs as operators begin to help in driving down rates. “We are looking at a very acceptable margin between the official and parallel market rates, say a maximum of five per cent,” Gwadabe said.
On corporate governance, Gwadabe said the CBN and security agencies are all out to ensure that sound corporate governance is followed. He urged BDC directors to show commitment to good corporate governance practices, and be transparent in rendering their accounts to the CBN.
Gwadabe called on security agencies to curb illegal currency transactions at Nigerian borders to strengthen the naira adding that recent surveillance of the nation’s boarders by combined teams of security agencies helped to cut frivolous demand for the dollar by 80 per cent.
He believes that eliminating hot money circulation in the economy will help naira recovery, promote transparency and accountability in the market. He called for harmonization and effective linkages among security agencies and between regulatory agencies and policy makers for effective and speedy naira recovery.
Gwadabe praised CBN for the unveiling Small and Medium Enterprises (SMEs) Forex Window but recommended that BDCs be involved in the transactions between $5,000 and $10,000 as practiced in other climes. This, he said, will boost dollar liquidity and enhance the value of the naira against world currencies.
Connect via email
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- July 2016
- June 2016
- May 2016
- April 2016