The Association of Bureau De Change Operators of Nigeria (ABCON) have come out to recommend measures to the Central Bank of Nigeria through which it believes the depreciation of the naira can be stopped.
Following the continued downslide ongoing in the foreign exchange market, and the shortage of the dollar, ABCON has deemed it necessary to weigh in on the matter in order to save the FX market, in what it has termed as ‘the design of a dynamic operational modalities of standard practices’.
According to ABCON, the Central Bank of Nigeria (CBN) would need to restructure the BDC sub-sector and resume dollar sales to the public through existing licensed BDCs considering the inability of the intervention through Deposit Money Banks to connect the official and parallel markets exchange rate. These and more measures were incorporated in the ABCON Quarterly Economic Review for the third quarter of year 2021, as seen by Dealmakers.
Here is what ABCON said;
“Industrialists have reported increased scarcity of foreign exchange in the system since the stoppage of intervention to BDCs which is an indication that, irrespective of the anomaly observed in the operations of BDCs, part of the allocation to the sub-sector flows into the real sector. Thus, it is logical to consider restructuring BDC operations to weed out the dysfunctional units and operators bringing out the real outfits for operational efficiency. These can be achieved through the design of a dynamic operational modalities of standard practices.
The refined outfits can effectively operate on independent transparent platforms dealing in autonomous funds in the economy. They should be permitted to operate as a fully independent foreign exchange professional under the best practices in international foreign exchange operations. Medium scale dealers in foreign exchange should be permitted to operate a lower platform to the Investors and Exporters (I&E) market under a transparent clearing house modalities.
The market or platform will compete for funds in the global foreign exchange market thereby deriving a merger and stability in the exchange rate in the economy. This is a basic solution to the divergent and multiple exchange rates regimes plaguing the Nigerian foreign exchange market for ages.”
Why are the Money Deposit Banks unable to bridge the gap of supplying foreign exchange to satisfy the demand earlier fulfilled by BDCs? Believing that BDCs sold only Personal and Business Travel Allowances which the banks are equally selling now.
What were the actual causes of the depreciation from cN400 to cN500 per US dollar earlier in the year 2021 if discontinuing sales to BDCs did not stop the trend? OR could the alleged sharp practices of the BDCs be responsible for the continued depreciation of Naira in the parallel foreign exchange market after their suspension?
If sharp practices of the BDCs were responsible for the poor policy performance of the apex bank, why has the market not responded to the policy since CBN discontinued sales to the sub-sector?”
On automation roadmap, ABCON admonished BDCs to continue to use this measure designed to enhance compliance and global competitiveness.
ABCON said; “This is imperative in view of the success of ABCON in integrating its members to the following: SAAS MASTERS for online real time rendition of returns to CBN, NIBSS; PLATFORM for BVN verification; NFIU PLATFORM for reporting of currency (CTR) and suspicious (STR) Reports, etc.”
In conclusion, ABCON stated that, new developments in the foreign exchange market have validated that the halt of dollar sales to BDCs is not the remedy to the continued depreciation of the naira in the parallel market. It added that the continued downslide of the naira has also shown that BDCs are needed in Nigeria’s foreign exchange market.