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CBN’s Forex Policy Helped Nigeria Exit From Recession – Gwadabe

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The President, Association of Bureau de Change Operators of Nigeria, Alhaji Aminu Gwadabe in this interview says the foreign exchange rate might hit N400 per dollar if spike is not curtailed. He further urged regulatory bodies to fine-tune policies to aid the association’s collaboration with Dangote Refinery in order to enhance foreign exchange supply. KAYODE TOKEDE presents the excerpts:

How has the Central Bank of Nigeria’s $40,000 supply to BDC operators impacted on the foreign exchange market?

The supply has a phenomenal impact on the foreign exchange market because it has defeated the pundit that predicted that dollar will be N1000 before end of 2017. The intervention by the Central Bank of Nigeria (CBN) through the BDC window has greatly impacted and influenced so many things such as the exchange rate stability, removal of spike, hoarding, speculation and growth in the nation’s economy.

In fact, it is one of the factors that helped the country from exiting recession. As an association, we launched a single exchange rate for the market, ensuring that naira should not be more than N400 to a dollar and this was one of the first thing we did as an association, to checkmate the spike and the weakness of the naira. Also, as stakeholders in the market, we have helped the Central Bank of Nigeria in ensuring that people have readily foreign exchange accessibility, like you said our number is about 3,500.

None of the banks even have up to 1000 outlets in the entire country. But as an association and stakeholder, we are boasting of over 3,500 BDC operators in all the nooks and crannies of the country. In Lagos alone, we have about 1,700 BDCs. So, we are all over the place ensuring liquidity. Right now, the market is even shocked up, because the parallel market rate is below the rate we are buying from the CBN.

We are currently buying at N358 to the dollar for working customers that come, some even N355 but we are going to the CBN window at N360 to a dollar.  So, it is even becoming impossible for people to go to CBN window and come out and sale to make margin because of the parallel market rate is even far below the selling rate of the CBN to the BDC sub sector.

 

In 25 years, Nigeria was in its first recession in 2017. How has stability in the forex market helped in achieving this feat?

First and foremost, the stability in foreign exchange has helped in meeting critical sector demands for foreign exchange. If you remember the situation in the country last year January, parents were crying on how to source dollar for their children abroad because there was no accessibility to the foreign exchange. Also, a lot of companies were shutting down because they cannot get dollars and a lot of them were forced to go to neighbouring countries to operate.

Furthermore, the spike was also high, but currently, we no longer have scenarios such that the naira is N360 to a dollar today. And you know, spikes affect planning. Hence, the supply has helped in ensuring that there is perfect planning for both the government, regulators and the manufacturers to ensure that the economy is on the path of growth.

Now, I think the manufacturers are even preferring stable interest rate to show you how positive impacts that has done to the economy. And on our own sector, BDC, it is not even the CBN’S foreign reserves that we are accessing but the diaspora remittance. Diaspora remittance accessed by BDC operators has also helped inflow. We have also seen that impact on Investors & Exporters foreign exchange window as soon as it was opened.

Do you think it is time for the CBN to merge all the rates?

The CBN should merge the commercial bank and the BDCs rate because they are selling to commercial banks at N358, and sell to BDC operators at N360 while we can buy from the parallel market at N358. But what we are saying is that they should merge the two rates. So, we are not asking for what is not practicable, because already there is window of N358 that goes to the bank.

What we are asking is give us the same rate because we have the same market; we have the same buyer and selling the same product. What they are selling is personal travel allowance and business travel allowance which is the same thing we are selling. They even have a dipper product lines than the BDCs operators because they do letter of credit, they do bills for collection among others while the BDC operators are only limited to about four lines. In fact, what we are writing to the CBN to deepen our product lines, diversify our product lines.

 

 You have severally warned members against speculation and other forex malpractices, how many have been found guilty and sanctioned?

We have introduced what is called “Utilisation documents” to our members which the CBN supported. Every week, each BDC operator will bring physical documents to us and to the CBN on how you have utilised the amount of money accessed. So, through that, we are able to checkmate utilisation and also if there is diversion and that has really discouraged them to be involved in speculation, hoarding or any illegal activities in the market.

We did that in 2017 to stop so many BDCs that their documents were found doubtful in nature. So, that is what we have been doing to ensure that there is sanity in the market, and at the same time, about the automation that we just launched, which ensures that all our members’ activities businesses can be traced.

 

How have BDC operators supported the CBN in rate convergence?

I think there are no tools that have helped the CBN in achieving market stability than the BDC operators. Prior to 2006, a lot of measures were put in place by the CBN. The entire introduced windows by CBN were not effective in stabilizing the foreign exchange market. As soon as there was a window for BDCs in 2006, that was when we began to achieve convergence and stability.

Anytime the CBN does not recognise the licensed BDCs in the foreign exchange market structure, the market begins to depreciate. Look at 2014 when they introduced a single exchange rate. The BDCs were exempted in the paper. That was one of the reasons it was not achieved. BDC operators negotiated with CBN and we told them the market will suffer because BDC operation is critical tool that CBN needs to achieve stability.

Yes, we understood there was dwindling foreign reserve but then, we do not need to go through foreign reserves. Why not encourage diaspora remittance? Let us be buying from almost the same rate they are selling from the black market. It is important for CBN to work with BDC operators.

 

How can Nigeria increase its foreign exchange inflow?

We have started on a better note by addressing infrastructure because it addresses investment. If Nigeria can have improved infrastructure, surely the economy will benefit. Whether we like it or not, our saving grace is foreign investment. If we can generate more foreign direct investment, it will boost our economy. I always maintain discipline across key foreign exchange stakeholders.

Also, agriculture has seen improvement and must be maintained. The federal and state governments should invest more in solid minerals. God has blessed this country with solid minerals and it is time government investment in them to increase foreign exchange inflow into the country. Lastly, the Dangote refinery will go a long way to boost liquidity in the foreign exchange market. We (BDC operators) are already thinking on how to partner with Dangote to deepen the market.

We want to be single outlet that provides foreign exchange to Dangote refinery so that we can make liquidity available for every Nigerians. With inflow from Dangote refinery to BDC, I can assure you dollar can be traded at N250 before the end of 2018. If CBN can fine-tune a mechanism between Dangote Refinery and BDC operators, we will crash the market before 2018. The positive side effects are inflation will slow further, new jobs will be created and there will be more inflow to the nation’s economy.



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