An umbrella body of the Central Bank of Nigeria (CBN)- licensed Bureaux de Change (BDCs) which identified as the Association of Bureau de Change Operators of Nigeria (ABCON), has commended the decision of the Olayemi Cardoso-led CBN to recall BDCs into the mainstream FX market, saying the move remains a major factor powering the exchange rate stability.
ABCON President, Dr Aminu Gwadabe, who made the remark at the weekend, said since the recall, the naira has appreciated from N1,915/$ to N1,255/$ representing N660 gain for the naira, which is significant by all measures.
Gwadabe said the gains of the CBN under Cardoso to recognize the power of BDCs in securing stable exchange rate cannot be over emphasized.
Aside monetary policy tightening that led to increased exchange rate and more investment in government instruments, he noted that the clearance of $7 billion forex backlog forward commitments, the recall of the BDCs were also a significant move by the apex bank to boost dollar liquidity at the retail end of the forex market.
Gwadabe therefore expressed ABCON’s gratitude to the Cardoso-led CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate transmission mechanism in forex management.
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“The reconsideration of the BDCs into the main stream foreign exchange market has not only demystified illegal economic behaviours of hoarding, rent seeking, round tripping and FX holding position and led to the emergence of exchange rate convergence.”
He said the stability in exchange rate has already started to have positive impact on the prices of goods and services.
“For instance the price for international school fees has dropped by 15 per cent; cost of medical tourism reduced by 20 per cent and air fares for local and international trips dipped by 25 per cent.
“The current developments in the foreign exchange market has started reigning in inflation as prices of most necessities are becoming relatively lower in the market. In a most serious note, the positive impacts include also heighten confidence of the public in the local currency as it eliminates currency substitution behavior which hitherto being adding pressure on our local currency”.
Gwadabe said the success story is unending as naira trades at N1,255/$ on Saturday, even lower than N1,269.765 that the rates BDCs are advised to sell.
Describing the ongoing market development as revolutionary, he said stable naira will attract more foreign portfolio inflows to the economy.
The ABCON boss noted that the previous practice where Nigerians took dollars from Nigeria for Hawala activities has seized as the reverse is the case where the purchase of dollars in Dubai is cheaper in Nigeria and therefore created a buisiness opportunity for dollar inflows rather than outflows after the rapid recovery of the naira against dollar.
Going forward, he said prospects for forex earnings are promising, with foreign portfolio investments on the rise and over $1.5 billion inflows few days after Monetary Policy Committee raised interest rate by 200 basis points.
He added that increases in foreign exchange inflows into the economy through the CBN’s monetary instruments is helping to boost foreign reserve accretion and gives the apex bank the necessary power to continue to defend the local currency.