The Association of Bureaux De Change Operators of Nigeria (ABCON) has urged the Central Bank of Nigeria (CBN) to lift the restrictions that make it difficult for Bureaux De Change (BDCs) to compete for the $20 billion inflow into the unofficial forex market.
This comes as the country’s import bill continues to rise, prompting the federal government to take action to address the issue, given the serious implications for the naira’s exchange rate.
The association stated this in its Quarterly Economic Review Report for the fourth quarter of 2021, noting that the CBN’s suspension of dollar sales to BDCs has triggered a period of reformation and potential realization.
These potentials, according to ABCON, include an estimated $20 billion annual inflow in the unofficial forex market, which far outnumbers the CBN’s annual dollar cash sales to BDCs.
Another potential for BDCs, according to ABCON, is the gap created by the CBN’s suspension of FX funding for BDCs. This gap is obvious, according to ABCON, because many medium and small-scale users of foreign exchange for imports have experienced untold hardship in processing form ‘M’ in deposit banks.
“These and more opportunities are open to the BDC sub-sector to research and evolve operational strategies and techniques without recourse to funding from CBN”, ABCON stated.
The association, on the other hand, urged the CBN to remove all restrictive and handcuffing controls that could stifle the BDCs’ ingenuity and, as a result, their ability to explore the above-mentioned opportunities.
ABCON, on the other hand, has urged the federal government to address the factors driving the nation’s rising import bill, which it says is putting pressure on the country’s external reserves and the naira exchange rate.
“Data from Nigeria Bureau of Statistics, show that Nigeria’s import bill rose by 51.1 per cent year-on-year to N8.15 trillion in Q3 2021. For as long as imports are increasing without matching equivalents in exports or foreign exchange inflows, the currency must depreciate.
By principle, a depreciated currency makes exports of a country cheaper in the international market thereby increasing the inflow of foreign exchange but unfortunately for Nigeria, the sectors where it has comparative advantage to excel is grossly traumatized by terrorism and insurgency due to lack of willpower of government to control the situation,” he pointed out.
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He noted that the country’s ongoing trade deficit has negatively affected its balance of payments account, further pushing up the exchange rate.
According to him, “notably, the official exchange rate at the Investors and Exporters (I&E) window depreciated by 6.03 per cent to close the year at N435 per dollar, while the parallel market depreciated by 22.8 per cent to close at N565 per dollar”.
“Inflation-linked devaluations, which often seemingly lead to ever-higher rates of inflation in the absence of sound domestic policies, are damaging”.
“Government should allow economic reasoning to outplay political tendencies which in the long run may lead the economy into catastrophic consequences”.