Bureau De Change operators sounded the alarm as Nigerians flock to keep their savings in US dollars amid concerns over the eroding value of the naira.
Aminu Gwadabe, the National President of the Association of Bureau De Change Operators of Nigeria, emphasized the urgent need for liquidity in the forex market.
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“For now, it’s a difficult situation which is also creating panic in the market because the value of the naira is eroding and because of that, a lot of people prefer to keep their savings in dollars,” he disclosed.
Gwadabe expressed skepticism about the impact of the $2.2 billion released by the African Import-Export Bank, citing the continuous demand in the Investors and Exporters (I&E) window. “Speculators will speculate, and we will run it out between 10 to 15 days,” he warned, calling for a fundamental shift in the supply of dollars into the FX market.
He said “The $2.2bn Afrexim bank crude prepayment facility is a welcome development but I don’t think it’s enough to stimulate the market considering the situation because if we put $2.2bn into the market, we have been seeing demand in the I&E window alone ranging from $150m to $250m daily so, in 10 days, the $2.2billion will be exhausted. Speculators will speculate and we will run it out between 10 to 15 days.”
In a proposal for transparency, Gwadabe urged the Central Bank of Nigeria (CBN) to revisit its 2020 circular, suggesting a separation of operation and ownership for Bureau De Change.
This, he believes, would enhance transparency by preventing the initiator of a fund from being the one terminating it.
“We, hereby, advise that the CBN review their 2020 circular whereby they have agreed or stated that the BDC should be an agent of the International Money Transfer Transaction so that we can now separate operation and ownership and with that, it won’t be the person that initiates the fund as the owner will be the one terminating the fund to the ultimate beneficiary.” he said.
Financial analysts support the surge in dollar holdings, citing the anticipation of further naira devaluation. Nigerians are strategically buying and hoarding foreign exchange to meet future financial obligations, such as vacations or funding education abroad. One analyst highlighted the prudent approach of individuals borrowing now to buy dollars, capitalizing on lower exchange rates, and holding them while paying interest on the borrowed amount.
He said, “ It’s a no-brainer, let’s think about it, if you look at the trend of the naira this year alone, there will be devaluation and if we look at the level of devaluation so far and people who have dollar needs in the next couple of months or years for instance may be buying and keeping it.”
The forex market faces a critical juncture, with stakeholders urging immediate action to address the challenges posed by the depreciating naira. As the nation grapples with economic uncertainties, the call for a comprehensive review by the CBN echoes throughout the financial landscape.
