As the Central Bank of Nigeria (CBN) abandoned its 16 month currency peg, with commencement of the new foreign exchange regime, the Association of Bureau De Change Operators of Nigeria (ABCON) has said the new forex policy has the capacity of generating liquidity in the market, but will create cartels and monopoly in the foreign exchange market, The Daily Times Newspapers can exclusively reveal.
Trading on the Nigeria Interbank Foreign Exchange (NIFEX) began on Monday, as the CBN sold foreign exchange to 21 bidding banks to clear the forex backlog and solve liquidity problems, even though the apex bank eventually appointed 15 of the Deposit Money Banks (DMBs) operating in the country as primary forex dealers, traders said on Tuesday.
According to forex traders, appointed dealers included Stanbic IBTC Bank; Standard Chartered Bank; Citibank; Zenith Bank and Access Bank. Also in the roll call are the United Bank for Africa (UBA), Sterling Bank and First City Monument Bank (FCMB) and Wema Bank.
But while responding to an enquiry put across by our correspondent, the National President of ABCON, Alhaji Aminu Gwadebe, via text messages bemoaned the new policy which only gives few primary dealers opportunities.
He disclosed further that the forex regime will officially devalue the Naira in the inter-bank market, adding that new forex regime is inhibitive as many Bureau De Change operators will wind-up their operation.
According to him, the policy will worsen the already unemployment problems in the country.
“The products to be traded in the market are cumbersome and technical. The critical retail segment of the market is not considered in its formulations”, he lamented.
Gwadabe said, “The BDCS aspirations in the new policy is completely killed and lack support for the survival of the BDCs. The new single market structure is compromised and meant solely for few cartels in the market. No BDCs can meet up minimum cash requirement of N600billion,” he lamented.
While questioning the role the to-be-authorised Foreign Exchange Market Primary Dealers (FXPD) would be playing, he disclosed that FXPDs were supposed to be bringing in dollars into the country and not to engage in buying off the ones (dollars) in circulation, which he claimed were already in shortfall.
He said that the present dollar liquidity situation in the economy cannot support the primary dealer structure.
However, the BDC boss had urged CBN to grant it one out of the Forex Primary Dealership (FXPD) licences to be issued by the regulator.
Gwadabe, who disclosed the group’s position, said as a major and critical stakeholder in the forex business, it will be against standard business practice to exclude bureaux de change (BDC) operators from the workings of the new CBN forex policy.
He said such licence would enable bureaux de change (BDC) operators access Diaspora remittances estimated at $21 billion annually and by extension, deepen dollar liquidity in the system.
ABCON is also asking the CBN to grant it self-regulatory status that would enable it monitor and supervise its members’ compliance with the extant regulatory requirement on the new forex regime.
Meanwhile the International Monetary Fund said it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.
Nigeria’s central bank governor said in a letter to President Muhammadu Buhari the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.
“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters. “It will provide greater flexibility in that market, the foreign exchange market.”
Senior IMF officials, including Christine Lagarde, managing director have urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues.