The Association of Bureau De Change Operators of Nigeria (ABCON) has said that the recall of Bureau De Change operators (BDCs) into the mainstream forex market is a major factor in the current stability being experienced with the exchange rate.
This disclosure is contained in a statement released by the ABCON President, Aminu Gwadebe, over the weekend where he lauded the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, for the decision.
Gwadebe said aside from monetary policy tightening that led to increase in exchange rate, more investment in government instruments, and the clearance of $7 billion forex backlog forward commitments, the recall of the BDCs was also a significant move by the apex bank to boost dollar liquidity at the retail end of the forex market.
The ABCON President, therefore expressed the association’s gratitude to the Cardoso-led CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate transmission mechanism in forex management.
Gwadebe said, “The reconsideration of the BDCs into the mainstream foreign exchange market has not only demystified illegal economic behaviours of hoarding, rent-seeking, round tripping and FX holding position, and led to the emergence of exchange rate convergence.’’
He said that the stability in the exchange rate has already started to have a positive impact on the prices of goods and services. For instance, the price for international school fees has dropped by 15%, cost of medical tourism reduced by 20% and air fares for local and international trips dipped by 25%.
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He said: “The current developments in the foreign exchange market has started reigning in inflation as prices of most necessities are becoming relatively lower in the market. In a most serious note, the positive impacts include also heighten confidence of the public in the local currency as it eliminates currency substitution behaviour which hitherto being adding pressure on our local currency.’’
Gwadabe said the success story is unending as naira trades at N1,255/$ on Saturday, even lower than N1,269.765 that the BDCs were advised to sell.
Describing the ongoing market development as revolutionary, he said stable naira will attract more foreign portfolio inflows to the economy.
Gwadabe said the naira has appreciated from February low of N1,915/$ to N1,255/$ representing N660 gains for the naira, which is significant by all measures.
He said the gains of the CBN under Cardoso to recognize the power of BDCs in securing stable exchange rate cannot be over emphasized.
He also said that the previous practice where Nigerians took dollars from Nigeria for Hawala activities has seized as the reverse is the case where the purchase of dollars in Dubai is cheaper than in Nigeria and therefore created business opportunity for dollar inflows rather than outflows to the economy, after the rapid recovery of the naira against the dollar.
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The ABCON boss noted that going forward, the prospect of forex earnings is promising, with foreign portfolio investments on the rise and over $1.5 billion inflows recorded a few days after the Monetary Policy Committee (MPC) raised interest rate by 200 basis points.
He said increases in foreign exchange inflows into the economy through the CBN’s monetary instruments is helping to boost foreign reserve accretion and gives the apex bank the necessary power to continue to defend the local currency.
He said, ”It is our view that the collaboration between the BDCs, CBN , National Security Adviser, Economic and Financial Crimes Commission (EFCC), as well as support from the Presidency helped in creating the opportunity for building the foundation of this achievement. Overall, the combination of these actions has induced an atmosphere of public calmness, confidence, hopes and liquidity in the markets.
‘’We call therefore on the CBN to continue to calibrate the existing relationship between the BDCs and the apex bank to sustain the success story.’’