Bureau De Change (BDC) operators have said that despite the naira’s gains in the foreign exchange market during the week, the local currency still suffers from a loss of confidence.
The licensed currency traders said that although it is usually a good development to see the naira gaining strength against other foreign currencies, it however, noted that the local currency is overburdened by devaluation at the official market and depreciation at the open market.
This was made known by the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, over the weekend.
Gwadebe said the appreciation of the naira can be attributed to the intervention of the Central Bank of Nigeria (CBN) at the Electronic Foreign Exchange Matching System (EFEMS) window, which has significantly boosted supplies, as well as weaker demand in the market.
ABCON had earlier revealed that the naira is fast becoming the most unpredictable currency in the world, noting that the local currency has been greatly affected by all kinds of wars ranging from trade, rate as well as speculative attacks.
Gwadebe had earlier highlighted some of the challenges affecting the forex market, including global economic uncertainty, regulatory changes, technology advancements, and market volatility.
The ABCON boss noted that economic slowdowns in major economies like the US, Europe, and China have resulted in decreased trade volumes and increased market volatility.
He also stated that the recapitalization policy for the BDCs has given rise to compliance costs for forex brokers and impacted market liquidity.
In summary, he said that these challenges have resulted in increased market volatility, reduced liquidity, higher trading costs, and greater regulatory scrutiny.
Gwadebe urged the CBN to always adopt a forward communication strategy on the good news and play down the bad news overloads as part of the ways to sustain the good performance of the naira in the foreign exchange market.
He said, ‘’The naira appreciated significantly at the open market from a low of N1580 per dollar to a higher level of N1545 per dollar during the week. The CBN intervention at the EFEMS window has significantly boosted supplies at the window, coupled with a weaker demand in the market.
‘’Yeah, it is always a good development to witness the local currency gaining strengths versus other foreign currencies but often overburdened by devaluation at the official market and depreciation in the open market.
‘’Secondly, the CBN is the catalytic actor in the market and should ensure their deliberate intervention across markets extends not only to the wholesale window of banks but to the third leg window of the BDCs to boost supply at the critical retail end of the market.
‘’In all, the naira still suffers loss of confidence and players’ resistance to upload their position during naira hegemony.’’
The BDC operators had attributed the crash of the naira in the foreign exchange market to the huge demand for forex due to the windfall from some contractual payments and releases by some Federal Government agencies.
Gwadebe, who admitted that the forex market is witnessing some unprecedented attacks, noted that the unfortunate development had once again given credence to the need for regulators to be consistent in the implementation of reforms and policies in a volatile forex market.
He had acknowledged that these occasional shocks in the foreign exchange market are fictitious, discretionary, and a burble that will burst.
Gwadede had also urged the apex bank to revisit its earlier prudential percentage, targeting a fraction of the International Money Transfer Operators (IMTOs) proceeds received by the banks and Fintechs to the BDC window.
