“Naira Gains N660 Against USD”: ABCON Explains Role of BDCs in Boosting Local Currency
- The Nigerian currency, the naira, has gained a whopping N660 against the US dollar since February to date
- The chairman of Bureaux de Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the move was due to the recall of BDCs to the FX market
- He said the naira’s rebound has started to have a positive impact on the economy as inflation is beginning to moderate
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Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
The Nigerian currency has been experiencing a massive resurgence against the US dollar and other major currencies following a series of actions by the Central Bank of Nigeria (CBN) to provide liquidity in the forex market.
The Association of Bureaux de Change Operators of Nigeria (ABCON) has attributed the naira’s excellent performance to the recall of Bureau de Change (BDC) operators to the forex market.
Source: Getty Images
CBN sells forex to BDCs
According to a statement by ABCON’s president, Aminu Gwadabe, the recall of the BDCs has boosted dollar liquidity at the forex market's retail market end alongside the CBN's monetary policy tightening stance.
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The development comes as the naira further appreciated in the black market to trade at N1,250 per dollar on Saturday, March 30, 2024, lower than the N1,269.765 rates CBN asked the BDCs to sell.
ThisDay reports that Gwadabe described the ongoing market reform as revolutionary and said a stable currency would attract more foreign investors and FX inflows to the economy.
The CBN had sold about $10,000 to each BDC operator in Nigeria at N1251 per dollar, asking them to stay within N1261 per dollar.
Gwadabe said the naira appreciated from February’s low of N1,915 per dollar to the current rate of N1,255 in the parallel market, representing N660 gain.
ABCON lists gains of CBN actions
Reports say the ABCON boss thanked the CBN governor, Olayemi Cardoso, and other agencies for recognising BDCs as a critical part of the forex market and an effective exchange rate transmission mechanism in forex management.
He said:
“The reconsideration of the BDCs into the mainstream foreign exchange market has not only demystified illegal economic behaviours such as hoarding, rent-seeking, round tripping and FX holding position, but also led to the emergence of exchange rate convergence.”
Analysts believe that the current rallying of the naira against the US dollar has closed the massive gap between the official window and the parallel market, making it unattractive for speculators to make gains on the back of the falling naira.
Analysts applaud CBN's actions
Emeka Umejei, a social affairs commentator, said the gains made by the naira are nothing short of miraculous, attributing them to the series of intentional steps CBN took to stabilise the local currency.
“I think the apex bank was pragmatic and intentional in its approach. They knew what the problems were and shot directly at the right target. The clearing of all verified FX backlogs and diaspora remittances were critical to the naira’s newfound strength,” he said.
According to Gwadabe, the stability in the exchange rate has already begun to affect the prices of goods and services positively.
He said the price of international school fees has dropped by 15%, the cost of medical tourism dropped by 20% and the prices of airfares for local and international trips reduced by 25%.
Dollar sells cheaper in the parallel market
Legit.ng previously reported that the naira appreciated in the parallel market on Friday, March 29, 2024, to trade at N1,280 per dollar.
The development means the Nigerian currency appreciated by 5.19% from the N1,350 per dollar traded on March 27, 2024.
Bureau de Change (BDC) operators quoted the buying rate of the dollar as N1,260 per dollar and the selling rate as N1,280, making a profit of N20.
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Source: Legit.ng
Pascal Oparada (Business editor) For over a decade, Pascal Oparada has reported on tech, energy, stocks, investment, and the economy. He has worked in many media organizations such as Daily Independent, TheNiche newspaper, and the Nigerian Xpress. He is a 2018 PwC Media Excellence Award winner. Email:pascal.oparada@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.
