How Naira Is Becoming The Most Unpredictable Currency– BDC Operators

Bureau De Change (BDC) operators in Nigeria have raised concerns over the increasing unpredictability of the naira. They say the local currency is now one of the most unstable in the world due to economic instability, forex shortages, and government policies.

The Association of Bureau De Change Operators of Nigeria (ABCON) made this known through its President, Aminu Gwadebe. Speaking in an interview, he highlighted that the Naira is currently struggling due to multiple factors, including trade and rate wars, as well as speculative attacks.

“The naira, unfortunately, is suffering an inconsistent journey, bedevilled by all kinds of wars ranging from trade war, rate war, and speculative attack. It is becoming the most unpredictable currency in the world,” Gwadebe stated.

Forex Shortages and Bank Policies Affecting the Naira

BDC operators have accused commercial banks of withholding dollars from them, worsening the forex shortage in the market. They say this has made it difficult for them to operate and provide forex services to individuals and businesses.

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According to Gwadebe, forex scarcity has led to increased volatility, pushing the naira into a free fall. He also noted that some banks have placed restrictions on international transactions, making it harder for Nigerians to access foreign currency.

“For example, some banks have limited the amount of foreign currency that can be withdrawn or transferred abroad. This is part of their response to the forex crisis,” he added.

Factors Fueling the Naira’s Instability

Gwadebe identified several challenges affecting the naira’s stability. These include:

1. Global Economic Uncertainty

Economic slowdowns in major economies like the US, China, and Europe have affected Nigeria’s forex inflows. Lower trade volumes and capital flight have increased pressure on the Naira.

2. Regulatory Challenges

The Central Bank of Nigeria (CBN) has implemented various regulatory changes, including the recapitalisation of BDCs. While intended to strengthen the forex market, these changes have led to increased compliance costs for forex traders.

3. Technological Disruptions

The rise of electronic trading and artificial intelligence in forex markets has introduced new risks, such as rapid fluctuations and flash crashes. Automated trading has made forex markets more complex, affecting traditional currency trading.

4. Market Volatility and Speculation

Geopolitical tensions, trade restrictions, and speculative attacks on the Naira have increased market volatility. Investors and forex traders, uncertain about the currency’s future, often rush to the dollar, worsening the Naira’s decline.

BDC Operators Suggest Solutions to Stabilise the Naira

To address the growing forex crisis, BDC operators have proposed several measures that the government should implement:

1. Unify Exchange Rates

ABCON recommends that the government continue its exchange rate unification efforts. A “willing buyer, willing seller” model can reduce market distortions and help stabilise the Naira.

2. Increase Liquidity in Banks

BDC operators are urging the CBN to raise the bank liquidity ratio to 40%. This move, they believe, will ease the forex shortage and ensure a steady supply of dollars.

3. Improve Transparency and Communication

The CBN should provide more information on forex demand and supply trends. Greater transparency can help reduce speculation and restore confidence in the market.

4. Allow BDCs to Partner with International Money Transfer Organisations

ABCON is pushing for BDCs to be made direct agents of international money transfer organisations (IMTOs). This, they argue, will increase forex availability and reduce dependence on the black market.

5. Boost External Reserves

Increasing Nigeria’s foreign reserves can help cushion the naira against shocks. The government can achieve this by attracting foreign investment, increasing exports, and reducing import dependency.

Naira’s Future Remains Uncertain

The forex market is currently facing unpredictable shocks, leading to concerns among investors and traders. Some experts argue that these fluctuations are temporary and will stabilise once economic policies become more consistent.

However, ABCON maintains that unless the government implements urgent reforms, the naira will continue to struggle. They warn that without clear and consistent forex policies, Nigeria’s currency could face even more challenges in the coming months.

For now, Nigerians remain uncertain about what the future holds for the naira.