BDCs Protest Mutiple Forex Rates
The Association of Bureau De Change Operators of Nigeria (ABCON) on Tuesday urged the Central Bank of Nigeria (CBN) to put an end to the multiple exchange rates that exist in the foreign exchange market.
Worried by the different rates obtainable in various segments of the market which hampers the nation’s currency, the retailers suggested a single rate regime of N399/ dollar to reduce the gap between the official interbank rate and the parallel market.
ABCON Ag. President, Mohammed Gwadabe, who spoke to journalists said the only solution at the disposal of the association is to have a single market exchange rate.
“Liquidity has shrunk because of the withdrawal of foreign investors from the market, most of them have moved out of the country. And one major factor too, is the drop in crude oil prices in the international market, and the dwindling foreign reserves.”
He expressed regret that Nigeria has not been able to build strong foreign reserves buffers, to cushion the effects of such instability, where a country like the United Arab Emirates has over $400 billion in its kitty.
“And that is a very big buffer for them, as it protects their local currency at any given time,”
On the other hand, the Deputy Managing Director, Afrinvest Ltd., Victor Ndukauba, told The Guardian,that the single market rate was not possible in a market determined environment.
According to Ndukauba, the best that could happen is a convergence of rates, noting that “price distortion means the market is inefficient and because there is scarcity of dollars because we [Nigeria] are not getting as much dollars as we used to from the sale of crude.”
According to him, the realistic market rate of the Naira can only be determined through the balance of payment transactions, income levels and purchasing power parity, and market integrity, adding that if the inter-bank rate was more transparent, people will be more willing to participate.
“Imagine if Diaspora Nigerians do $1billion monthly, this will boost confidence. But a situation where the parallel market is about N490 to $1, although very ridiculous, people will be tempted to [sell at]that rate because they will have more value for their money.” he stated