Bureaux De Change (BDC) operators in Nigeria have raised serious concerns over worsening foreign exchange instability amid acute difficulty in obtaining dollars from commercial banks despite directives from the Central Bank of Nigeria (CBN).
The ongoing scarcity of forex has triggered the recent depreciation in naira value and undermined confidence in the country’s currency market.
Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), noted that BDCs currently face numerous challenges, such as limited forex availability, unfavorable exchange rates from banks, reduced participation from commercial banks, shrinking profit margins and overall business uncertainties.
These adverse conditions have intensified currency substitution and speculative activities that are hurting the value of the local currency.
In recent trading, the naira suffered a sharp drop to N1,580 per dollar in the parallel market, commonly referred to as the black market.
This represents a 3.5 percent (N55) decline from the rate of N1,525/$ recorded earlier in the same week.
Concurrently, at the official foreign exchange market, the naira depreciated to N1,542/$ compared to the previous rate of N1,499/$.
Data from FMDQ Securities Exchange Limited also showed a downward trajectory with the Nigerian Foreign Exchange Market (NFEM) quoting the naira at N1,512.30 from N1,500.80 at the previous close.
Gwadabe said CBN needs to re-evaluate its interventions in the retail foreign exchange market. Specifically, he called for granting licensed BDC operators permission to import dollar cash and establishing a robust, transparent monitoring framework to ensure banks comply with forex sale directives to BDCs.
“The apex monetary authorities must sustain their strategic interventions in the retail market by allowing dollar cash imports by licensed operators and enforcing transparency in bank dollar sales to BDCs,” Gwadabe stated.
Industry analysts also linked the instability in the forex market to declining yields in treasury bills.
Ayodeji Ebo, Managing Director at Optimus by Afrinvest, explained that the reduced yields are likely to result in decreased Foreign Portfolio Investments (FPI), subsequently leading to diminished forex inflows into Nigeria.
“With expectations of lower interest rates, investors are rushing to lock in attractive rates now, thus limiting available liquidity for speculative investments or dollar-denominated assets, which in turn could dampen foreign currency demand,” Ebo explained.
Similarly, Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., explained the declining yields as a critical factor pressuring the naira’s exchange rate.
Meanwhile, Tilewa Adebajo, CEO of The CFG Advisory, attributed part of the currency instability to speculative activities, exacerbated by uncertainties in forex supply.
Gwadabe advocated for coordinated action by fiscal authorities, including addressing fiscal deficits, enhancing productivity, and tackling the persistent inflationary pressures affecting the economy.
He further urged federal and state governments to declare a state of emergency on inflation, emphasizing the necessity of price stability to achieve sustainable economic growth.
