In a renewed effort as bridging the widening gap between the official and the parallel market rates, currency dealers, the Bureau de change operators (ABCON) yesterday set the reference exchange rate of N399/$ with a promise to collaborate with the Central Bank of Nigeria (CBN) for sanity in the market.
“ABCON is about finding ways to strengthen BDCs to meet the forex demand at the retail end of the market so that they can continue to enhance employment generation in the country,” Aminu Gwadabe, association president said at a press conference in Lagos yesterday.
Gwadabe said to ensure transparency in the operations, the members had agreed to set a weekly reference rate to improve liquidity and help rebuild investors’ confidence on the economy.
“Once liquidity improves, the wide margin between the parallel and official market rates will be bridged,” Gwadabe said.
The operations of the association, he went further, would be integrated saying that about 2000 of the 3000 member association had complied leaving the remaining members up to the end of this month to comply.
By so doing, the activities of the members would be subjected to public scrutiny while identities of management and board members would be known so as to engender confidence in the association which he said is ‘branded the black sheep in the industry.”
He said the naira’s outlook was “promising” as crude prices have started to rise. Low prices have dried up the oil income that makes up 70 percent of government revenues, cutting the dollar supply and pushing Africa’s largest economy into recession.
Retail currency operators account for less than 5 percent of total foreign currency trading in Nigeria. But dwindling liquidity on the official market due to low oil revenues and CBN’s assumption of the main dollar supplier have exposed the activities of the association.
Consequently, Gwadabe said the body was seeking approval from the central bank to access dollars from exporters and has recommended stiffer penalties such as suspension of licenses and fines for some of its members for failing to submit documents on forex purchases from money transfer agents.
However, Nigeria currently has multiple Naira to Dollar exchange rates for transactions in its economy, a signal of the dysfunctional Foreign Exchange (FX) market.
This has led to dollar shortages for firms and a slowdown in economic output in Africa’s largest economy.
BusinessDay has identified up to nine different exchange rates including the BDC rate of N399/$. They include a pilgrims rate of N197/$, 2017 Budget rate N305/$, interbank rate N315/$, fuel imports rate N316/$, International card rate N319/$, Travelex N345/$, Western Union N375/$, and Parallel Market rate near N488/$.
Analysts say this is causing a lot of damage and uncertainty to the economy, as well as encouraging round tripping and rent seeking.
“We urge the regulators and government to harmonise the multiple exchange rates that pervaded the 2016 fiscal year. We also appeal to members of the print and electronic media to adopt a single foreign exchange market rate system in their reporting and completely disregard the rates in the parallel market as it is small in volume, cash based and not recognized by enabling law,” Gwadabe said