The Central Bank of Nigeria (CBN) has been urged by the Association of Bureaux De Change Operators of Nigeria (ABCON), to put an end to the official fixed rate in the foreign exchange market.
ABCON’s President, Aminu Gwadabe, said abolishing the fixed rate will strengthen the naira. His statement was driven by the recent depreciation of the Nigerian currency in both the official foreign exchange market and the black market.
Prime Business Africa had reported that the dollar exchanged in naira at the rate of N429/$1 in the official market, Investors and Exporters window, but traded at N705/$1 at the parallel market.
The current level of the naira in the I&E window is said to be caused by the control of the movement by CBN, with speculations that if the naira is allowed to float without the apex bank’s influence, it will reflect almost, if not same range the dollar sells at the black market.
Despite the wide upward gap floating the naira could trigger against the current rate, Gwadabe said that is the solution to taming the bullish run of the dollar against the Nigerian currency.
He also suggested an intervention in the open forex market through supply of dollars to counter the scarcity of the foreign currency in Nigeria, in a bid to improve naira’s value in the foreign exchange markets.
“It might sound counterintuitive, but the way out of the current frenzy is to abolish the official fixed exchange rate and allow the Naira to float. CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin.
“Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira.” Gwadabe said.