Worried by a
spike in the Naira exchange rate, the Association of Bureau De Change Operators
of Nigeria (ABCON), Tuesday pledged to work with the Central Bank of
Nigeria
(CBN) to end an emerging era of multiple exchange rates in the foreign exchange
market.
The decision
came as the retail forex traders lamented that the variegated rates obtainable
in various segments of the market were gradually killing the nation’s currency,
adopting a single rate regime of N399 as preferred reference rate to the
dollar. They argued the option would help the country reduce the gap between
the official interbank rate and the parallel market.
“The
association believes that by working closely with the CBN, investors’
confidence will be restored to the market, which will translate to bridging of
the gap between the parallel and the official window,” he said.
The Nigerian
authorities have been pressing retail operators to narrow the wide gap between
naira’s official rate – currently at N305 to the dollar – and a parallel rate
of over N490 in recent days.
But the BDCs
President, Aminu Gwadabe, who is due to meet central bank officials next
Tuesday, said his members had agreed to set a weekly reference rate to improve
liquidity and help rebuild investors’ confidence on the economy.
“Once
liquidity improves, the wide margin between the parallel and official market
rates will be bridged,” Gwadabe told reporters at a meeting in Lagos.
The ABCON boss
who said naira’s outlook was “promising” with the strong rally in crude prices,
lamented that liquidity constraint in the foreign exchange market was caused by
low oil income, which currently accounts for about 70 per cent of government
revenues.
Although
foreign currency retailers account for less than 5 per cent of total foreign
currency trading in Nigeria, poor liquidity at the official market arising from
low oil revenues had constrained supply to it from CBN, leaving them only with
inflows from International Money Transfer Organisations (IMTOs).
Gwadabe said
the body was seeking approval from the central bank to access dollars from
export proceeds to grow liquidity adding it had recommended suspension of some
of its members for failing to submit documents on forex purchases from money
transfer agents. The naira lost a third of its official value against the
dollar in 2016.
Meanwhile, the
association has appealed to Nigerians to adopt a single foreign exchange rate
system in their transactions, adding that quoting rate at the parallel market
as reference rate was misleading since they could get better offer at the BDC
window.
“We urge the
regulators and the government to harmonise the multiple exchange rates and
disregard the rates in the parallel market. The parallel market rate is small
in volume, cash base and not recognised by extant laws,’’ Gwadabe said.
He noted that
Egypt and a few other countries had developed the single exchange system, which
helped them reduce volatility and speculation in their markets, while
recognising the daunting task in switching to a “complete and single determined
market rate.”
According to
him, the foreign exchange market is volatile subject to the whims and caprices
of speculators whose stock in trade is manipulation.
Sunnews
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