New Exchange Rate: BDC Operators List 3 Factors Responsible for Dollar's Crash by Over N200
- The naira has been improving against the US dollar in all foreign exchange markets over the last few days
- The sharp rise of the naira followed the introduction of a transparent trading system that curbed speculation
- ABCON President Aminu Gwadabe spoke exclusively to Legit.ng and explained the naira's recent good performance
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The naira has appreciated significantly against the US dollar recently, strengthening by over N200 from an exchange rate as high as N1,780 to N1,500 in the past week.
Nigerians have celebrated the currency's strong performance in recent times, which has renewed hope for the Central Bank of Nigeria's (CBN) exchange rate policy.
Driving factors helping the naira
Speaking with Legit.ng on the naira's recent surge, Aminu Gwadabe, the president of the Association of Bureaux De Change Operators of Nigeria (ABCON), lauded the government and the Central Bank of Nigeria (CBN) for their efforts.
However, he explained that the primary driver of the naira's appreciation is the renewed confidence of portfolio investors in Nigeria's economy.
According to Gwadabe, the oversubscription of various government-issued bonds has induced a massive inflow of dollars, boosting the country’s foreign exchange reserves and strengthening the naira.
He added that the launch of the CBN's Electronic Foreign Exchange Management System (EFEMS) was another crucial factor.
He noted that the platform has introduced much-needed transparency to Nigeria's foreign exchange market, curbing speculative activities, currency substitution, and frivolous dollar demands.
"First, it is a welcome development and wish to congratulate all Nigerians, the Government and the Central Bank of Nigeria. The appreciation of the naira is a result of the combination of many factors.
"The return of confidence of the portfolio investors on our various bonds issued and oversubscribed has induced a massive supply of dollars into the economy that helped the recent fortune of the naira."
"Secondly, in the midst of these increasing inflows, the CBN launched its EFEMS platform that eliminated the obscured nature of trading in the official/interbank foreign exchange market.
"It helped to discourage certain illegal economic behaviours like speculation, currency substitution and frivolous demand. It is indeed a game changer for transparency, price discovery and accountability."
He added that diaspora remittance inflows are rising, facilitated by financial technology platforms and International Money Transfer Service Operators (IMTOs).
This surge, he explained, has injected liquidity into the retail foreign exchange market, which has historically been volatile.
"The increasing higher receipt of Diaspora remittance inflows through the fintech and the IMTSOs is another important contributory factor that injected liquidity in the retail end of the market where volatility is pervasive.
"Currently, we are in a situation where supply outstrips demand and are also witnessing an inorganic appreciation of our local currency. There is a complete absence of demand."
CBN adjusts Customs exchange rate
Legit.ng also reported that the Central Bank of Nigeria has decided to reduce the exchange rate for importers clearing goods.
The decision followed the strong performance of the naira in the official and unofficial FX markets, renewing cost hopes.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
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Source: Legit.ng
Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.
Aminu Gwadabe (President at Association of Bureaux de Change Operators of Nigeria) Alhaji Aminu Gwadabe is the president of the Association of Bureau De Change Operators of Nigeria (ABCON) that represents the interests of licensed Bureau de Change operators in Nigeria. Gwadabe comments on issues relating to the foreign exchange market, currency exchange rates, and economic policies in Nigeria over the years.