Forex Policy Widened Exchange Gap by N300 – ABCON

BDCs blame widening market arbitrage on wrong policies

The spread between official and black market exchange rate has exceeded N300 per dollar and still rising. President of the Association of Bureau de Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, attributed the huge differential to the Central Bank of Nigeria’s (CBN) unorthodox policies.

At the weekend, the dollar exchanged for about N740 at the black market. The Investors’ and Exporters’ (I & E) window closed at about N436/$ last week.

In recent months, the foreign exchange (FX) illiquidity had worsened, with commercial banks reviewing existing rules of business/personal travel allowance (B/PTA) rules.

Many stakeholders have called for adjustment of the official rate to near the real rate of exchange to close the market spread, which had triggered several market manipulations, including round tripping.

But Gwadabe attributed the widening differential to unorthodox management practices that lack credibility and transparency. He said the arbitrage has become a burden on the market and economy.

Speaking with journalists, he said: “This encourages rent-seeking and currency substitution that continues to hurt real sector operators and the overall economy.”

He recalled that when the apex bank decided to suspend sale of forex to Bureau De Change (BDCs) in July 2021, the open market rate was about N501/$. This means that naira has depreciated on the black market by about 48 per cent in less than 18 months.

Gwadabe said small retail exchange institutions remain at the centre of poor exchange rate policies, hence the need for the regulator to support BDC participation in achieving FX stability.

This, he added, can be achieved through increased automation of BDC processes and providing more channels of transactions to achieve market equilibrium, while eradicating rent seeking, currency substitution and speculation.

“I am very confident that Nigeria will, in the not too distant future, achieve a stable exchange rate and increase access as the policy environment improves,” he said.

According to him, the CBN has made attempts to introduce many policies outside the conventional money supply, which have not advanced the cause of market stability.

Gwadabe cited the Naira-4-Dollar scheme as well as the export rebate initiative as some of the policies that have affected the market negatively, calling for an overhaul of the system.