BDCs seek single market driven forex rate

National Treasurer, Association of Bureaux De Change Operators (ABCON), Gbadamosi Moh-Murtala; Ag.President, Mohammed Gwadabe; and Chairman, South West ABCON, Taiwo Ebenezer, at the maiden interaction with journalists in Lagos, yesterday.

Put ideal exchange rate at N400 to $1
Instituting a single market driven foreign exchange (forex) rate has been identified as a major step to stabilising the value of the Naira against other currencies, while also stemming volatility on account of speculations in system.

The Association of Bureaux de Change Operators of Nigeria (ABCON), who canvassed this yesterday in Lagos, also put the ideal or what it described as the “realistic exchange rate” under the prevailing economic circumstances at N400 to $1. The CBN official market rate is N305 to $1, while banks sell to the BDC at N381. The BDCs have a band of N399, where the parallel market is about N480.

However, the high volatility and multiple exchange rates have become a disincentive to new foreign direct investments, while the uncertainty and rate fluctuations have reduced the capacity of firms to invest in export.

ABCON Ag. President, Mohammed Gwadabe, at a maiden interaction with journalists, said the single market exchange rate is one of the solutions the Association came up with to help stem market volatility.

He also expressed concern that despite series of policies enunciate by the Central Bank of Nigeria (CBN), to ensure stability; the forex market still remained highly volatile.

The ABCON boss therefore declared: “Liquidity has shrunk because of the withdrawal of foreign investors from the market, most of them have moved out of the country. And one major factor too, is the drop in crude oil prices in the international market, and the dwindling foreign reserves.”

He expressed regrets that Nigeria has not been able to build strong foreign reserves buffers, to cushion the effects of such instability, where a country like the United Arab Emirates has over $400 billion in its kitty. “And that is a very big buffer for them, as it protects their local currency at any given time,” However, the Deputy Managing Director, Afrinvest Ltd., Victor Ndukauba, in a telephone chart with The Guardian, disagreed with Gwadabe on the single market rate saying it was not possible in a market determined environment.

According to Ndukauba, the best that could happen is a convergence of rates, noting that “price distortion means the market is inefficient and because there is scarcity of dollars because we (Nigeria) are not getting as much dollars as we used to from the sale of crude.”

He also noted that there is lack of confidence in the official forex market, noting that if all the other autonomous sources of forex including Diaspora remittances, which account for up to $22billion are channelled through the official market, then the market will be closer to a convergence.

He argued that a realistic market rate of the Naira can only be determined through the balance of payment transactions, income levels and purchasing power parity, and market integrity, adding that if the inter-bank rate was more transparent, people will be more willing to participate.

“Imagine if Diaspora Nigerians do $1billion monthly, this will boost confidence. But a situation where the parallel market is about N490 to $1, although very ridiculous, people will be tempted to that rate because they will have more value for their money.”