Stronger naira expected as EFCC agrees with BDCs to crash black market rate
The pressure on foreign exchange (FX) is expected to ease soon and a stronger naira is anticipated as the Economic and Financial Crimes Commission (EFCC) and the Association of Bureaux De Change Operators of Nigeria (ABCON) have agreed to crash the dollar rate at the black market.
This followed a meeting held on Monday at the EFCC headquarters in Abuja attended by EFCC Chairman, Ola Olukayide and ABCON National Executive Council (NEC) led by its President, Aminu Gwadabe.
When contacted on Tuesday, Gwadabe said he would share the communique as soon as possible.
Part of the discussion was a directive for an approval for ABCON to establish a common website for BDCs rate and trading platforms.
The platform is to also serve as a challenger to other platforms in the economy and ensure uniform rate reporting.
ABCON reiterated CBN-licenced BDCs readiness for regulatory reforms that would reposition the operators for enhanced efficiency, transparency and compliance with set regulations in the interest of the financial system and economy.
Gwadabe said that despite the challenges facing the BDC segment of the financial markets, its role of providing across-the-counter, retail foreign exchange services to end-users is sacrosanct.
He said ABCON and CBN-licenced BDCs will continue to discourage forex end-users from patronising the unofficial or black market segment of the forex market to achieve exchange rate stability and convergence.
Nigeria’s financial crimes watchdog has granted approval to the Association of Bureaux de Change Operators of Nigeria, allowing them to publicly disclose the buying and selling rates of the naira against the dollar on the internet.
Aiming to boost competitiveness and foster better price discovery in the market, the association’s president, Aminu Gwadabe, emphasized the move’s objective to challenge the parallel market.
This decision marks a departure from the previous central bank leadership’s measures, which sought to control bureaux de change and restrict the visibility of the unofficial market in an attempt to stabilize the official naira. However, those measures inadvertently pushed trading activity to the streets and into the shadows.
With the new directive, naira exchange rates are set to be prominently displayed online, aligning with the broader initiative of Africa’s most populous nation to transition away from a managed exchange rate and bring about greater unity between the official and unofficial markets.
The naira has weakened by about 50 percent against the dollar since the reforms were announced in June and the spread between the two markets — which briefly merged — has widened due to the local scarcity of dollars, Bloomberg reports.
The Economic and Financial Crimes Commission has taken aim at currency traders, many who operate on the streets, accusing them of money laundering and manipulation.
The central bank in September also warned foreign-currency hawkers to stop betting against the naira or face sanctions.
Institutions seeking large sums of dollars, including foreign companies, which need to repatriate naira revenue, get the US currency via the central bank at the official rate.
Inadequate liquidity in the official market has led to a hefty backlog of demand, which the central bank is trying to reduce but still has some way to go. Finance Minister Wale Edun told Bloomberg Television on Jan. 17 the backlog was about $5 billion. Others say it may be twice as high.
Despite these efforts, the naira remains under pressure. Its value on the unofficial market on Tuesday was about 1,365 naira per dollar, a record low and more than 30% above the official rate.
Moreover, it’s not clear if the rates to be published by the exchange bureaux will be very different from those already collated by dealers on the street, who’re also licensed operators.
The central bank in September capped the rate at which forex bureaux can transact in the currency at plus-or-minus 2.5% of the official market-weighted average from the previous day.
In 2021, it had suspended an online platform set up by the bureaux de change to publish their own rates, as well as another platform that published the parallel market rates, accusing the operators of manipulating the rates.
The bureaux will now be “upscaling,” the old website to “serve as a challenger to other platforms in the economy,” Gwadabe said.
