Monday, 16 January 2017

Fresh battle to save the naira’s begins

BUREAU de Change (BDC) operators have been looking up to this week with high hopes.  They will be receiving the first batch of dollar sales for the year from the Central Bank of Nigeria (CBN), with the cash expected to boost dollar liquidity and strengthen the naira against the greenback.

Besides, the BDC operators, under the aegis of Association of Bureaux De Change Operators of Nigeria (ABCON), will today begin the implementation of the newly launched Uniform Weekly Exchange Rate for Licensed Bureaux De Change Portal.

The portal is being launched to promote exchange rate convergence and achieve uniform exchange rate for the naira against the greenback across all licensed BDCs. It was created with the understanding that the Foreign Exchange (forex) market is driven by information flow. The positive information flow, it is believed, will translate to better pricing for the naira and improved investment sentiments among others.

Having recognised these facts, the ABCON, the umbrella body for all CBN-licensed BDCs, last Tuesday, lunched the Uniform Weekly Exchange Rate for Licensed Bureaux De Change Portal.

ABCON President Aminu Gwadabe, who launched the portal at a media forum in Lagos, said the technology will bring exchange rate convergence, eradicate currency speculation and ensure the naira’s speedy recovery against the dollar.

According to him, such feats are in line with CBN Governor Godwin Emefiele’s plan to stabilise the naira and boost investors’ confidence in the local economy. The CBN chief told BDCs at a meeting that he was looking at ways to boost dollar liquidity and eliminate the spread at the parallel market.
The apex bank’s chief also promised not to devalue the naira again.

The decline in the prices of oil since mid-2014, cut government revenue and triggered currency controls that crippled industries and contributed to contraction of the nation’s economy.

Last June, the authorities removed a 15-month currency peg to attract inflow. Although the naira has plummeted almost 40 per cent since the unit was floated, traders said it is still being managed by the government. The rebound in oil prices has helped the country in boosting its forex reserves to $26.7 billion as of January 10.

According to Gwadabe, the BDCs Weekly Rate was launched to make it a reference point for realistic rates in the market that will boost foreign investment inflows, displacing the damaging effect of foreign media platform like Abokifx.com to the economy.

Gwadabe was confident that with the gradual recovery in crude oil prices, enhanced commitment of the CBN to economy diversification which has led to rising production of local rice and drop in import bills, as well as President Muhammadu Buhari’s political will to implement key economic reforms, the task of achieving a single determined exchange rate will be achieved.

He urged the media and general public to adopt a single rate in their reporting and forex dealings, and also always quote rate on the ABCON website- www.abcong.ng for consistency and uniformity of reporting.

The ABCON chief reiterated the need for the public to deal with CBN-licensed BDCs only and urged the public to report errant operators for necessary sanction.

“ABCON wishes to reiterate its willingness to embark on a comprehensive media campaign on the roles, activities and location of members nation-wide so as to provide a guide to the public in dealing with only CBN-licensed BDCs and for the public to report any errant operator for necessary sanction”, he said.

Gwadabe informed that the CBN will impose between N500, 000 to N2 million fines on any BDC operator that violate regulatory policies and while such operators may also face license suspension.

He called for public support for ABCON’s determination to highlight positive rates development in the market through the BDCs Weekly Rate for media coverage which was launched at the event.

“We also seek your support and partnership to assist the CBN and government to eliminate or reduce to the barest minimum, activities of parallel market operators. We also want to, through our partnership with you, give visibility to registered BDCs in the market and create more awareness on the role of operators in selling forex to the retail end of the market,” he stated.

The ABCON chief spoke of the need for the CBN and Federal Government to harmonise the multiple official exchange rates in the country and adopt a unified rate for transactions.

Calling for the adoption of a single forex market rate system, Gwadabe said that licensed BDCs will post an exchange rate every Monday on its website from January 16 to “highlight positive rate development in the market” and counter domains such as Abokifx.com, which publishes ‘high’ unofficial prices daily.

Trading in the parallel market became more regular since 2014 after the CBN strengthened capital controls as crude oil prices tumbled at the global market. Dollar trades for about N490, compared with the official rate of about N315.

Gwadabe, who said that the BDCs will initially quote a rate of N399/$, added that the parallel market rates will be disregarded as they were not recognised by law, raising the hope that exchange rate will continue to improve in the course of the year, despite the challenges being faced in the forex market.

Stakeholders seek transparent price discovery
Associate Research, Eczellon Capital Limited, Mustapha Suberu, said there was need to allow a transparent price discovery in the market, which he believed would stimulate dollar inflows into the economy and subsequently, lead to local currency stability.

He called for more transparent forex market that would allow foreign investors to invest in the economy and bring about positive market-determined rate.

Managing Director, Afrinvest West Africa, Ike Chioke, said the incorporation of a long-term diversified strategy in fiscal policy is required to cushion shocks in various segments of the economy and revive the naira.

To him, the persistent pressure on the naira could have been minimised if a counter fiscal policy had been developed, as the CBN cannot continue to defend the naira with foreign reserves.

Chioke said: “To reduce this pressure, an inward looking policy (tax incentives, infrastructure development and production subsidy) should be emphasised to reduce the dependence on imported goods.”

Apart from oil receipts, the development of the agricultural sector will in the short-term reduce the forex burden of food imports and on the long run, enhance foreign receipts if its comparative advantage in the sector is efficiently deployed.

A BDC Operator and Managing Director, E.M Consolidated Investment Limited, Emeka Moses, said the BDCs always make returns to the CBN which monitors and sanctions defaulters.

He said the introduction of Bank Verification Number (BVN) has made it easier for the CBN to detect and monitor BDCs for compliance.  “I want the CBN to continue to carry out spot checks on BDCs and ensure that those that violate regulatory guidelines are sanctioned”, he said.

Moses said the portal will enables the public to know the prevailing rate at each day and demand adherence to such rate during transactions.

“If the public knows the rate, it will be easier to detect and spot BDCs that sell above such rate, and get them reported to regulators,” he said.

A former Executive Director with Keystone Bank, Richard Obire, said that the implementation unified rate across all CBN- registered BDCs by ABCON will bring sanity to the forex market. Obire said: “I do not know how the group wants to achieve this but if well implemented, it will bring orderliness to the market. It is easier to achieve such feats Personal Travel Allowance and Business Travel Allowance transactions.  It is really a good initiative that will reduce the level of uncertainty in the market.”

Revenue leakages on Diaspora funds lingers
The Federal Government has been losing billions of dollars as Nigerians in Diaspora avoid official transactions when remitting dollars home.

Going by the figures released by Senior Special Assistant to the President on Foreign Affairs and Diaspora Matters, Mrs. Abike Dabiri-Erewa, Nigerians in the Diaspora sent home $21 billion in 2015, which boosted the local forex market last year.

Mrs. Dabiri-Erewa said: “In 2016, they remitted $35 billion which is higher than what was remitted in 2015. This remittance by Nigerians living abroad is the highest in Africa and the third largest in the world.”

But Gwadabe disclosed that less than five per cent of the $35 billion remitted in 2016 was officially captured by the CBN because of exchange rate divergence, which discourage Nigerians in Diaspora from sending their funds home through official channels.

He said that harmonisation of the multiple exchange rates in the country, will make the rate for Diaspora remittances more attractive to Nigerians in Diaspora.

His words:  “The single forex rate has succeeded in Egypt. Nigeria should block all forex leakages to make it work in the country. Forex market is an information-driven market. The type of information you release helps to swing rates and would also help the CBN’s plan to achieve single exchange rate,” he said.

Gwadabe said the ABCON has been working very hard to build public confidence in registered BDCs because the forex market is driven by perception adding that the ideal rate for the naira is N400/$ even as speculation is hurting the local currency.

He urged the CBN to stop banks from selling Personal Travel Allowances (PTAs) and Business Travel Allowances (BTAs) to travellers and assign the role to BDCs.

Will economic buffers save the naira?
Gwadabe urged the Federal Government to build strong buffers for the naira to withstand headwinds that come during economic crisis like in other climes.

The United Arab Emirates (UAE) for instance, has more than $400 billion in their reserves. The buffer is big enough for UAE to protect its local currency at any given time.

“But the Federal Government and the CBN have stood their ground for a very long time by not allowing naira to float freely. The advantage of the flexible forex regime is that the volatility you see, whereby naira everyday is getting weaker, once it goes up, another thing will bring it down,” he said.

Continuing, he said: “The fact is that when you talk of BDCs, there are parallel market operators and black market operators. The parallel market is the opposite of official market.

“So, the BDCs are not parallel market operators. There are over one million parallel market operators in this country and they have been here even before the coming of the CBN. They have been here even before the CBN licensing the BDCs in Nigeria”.

Noting the big difference between a parallel market operator and his BDCs counterpart, he said:  “And if you look at it, last year, we were branded the black sheep in the industry. In India, the BDCs generate over $30 billion from the Diaspora remittances.

“In United Arab Emirates, the entire banking needs of banks are met by the BDCs. The working of the Lebanon economy is highly dependent on the activities of BDCs in that country. I want stakeholders to support Nigeria BDCs in building the economy.”

BDCs embrace automation of processes
On the ongoing automation of BDCs’ operations that will help online real-time operations and enhancement of compliance among operators, Gwadabe said the facility would boost operational transparency, ease of public accessibility of BDCs’ procedures, returns rendition and regulatory supervision.

Gwadabe said: “We want to introduce certification for registered BDCs. The ABCON is also coming up with schools that will train and retrain members and encourage record keeping. We believe that once we are able to introduce measures that make the operations of parallel market irrelevant, they will be eradicated.”

He said that ABCON members have been pushing to become sole handlers of PTA and BTA and also raising their operational modalities to ensure they become agents of International Money Transfer Operators (IMTOs).

Gwadabe said that despite the challenges facing the economy, the CBN and BDCs will continue to work together and find sustainable solutions that can help the country wriggle out of the ongoing forex crisis and achieve full economic recovery.

He said: “We have continuously assured the CBN and taken appropriate measures to ensure that purchased funds are disbursed to end users and for eligible transactions only. We also render weekly returns on purchases from the banks to Trade and Exchange Department of the apex bank. We also ensure strict compliance to the provisions of the anti-money laundering laws observance of appropriate Know-Your-Customer principles in the handling of forex transactions.”

The CBN, last week, confirmed the operating licenses of 3,147 BDCs that met its N35 million mandatory capital base. The reviewed list was the first since May 29, last year, when the apex bank approved 2,998 operators to meet customers’ forex needs at the retail-end of the market.

The CBN said the new approvals in BDCs were in line with its plan to deepen the forex market by getting more operators involved in the retail-end of the market.

Gwadabe said that the licensing of new BDCs was a positive development that is expected to deepen dollar liquidity in the system.

Disclosing that the apex bank has a mandate to review the list of operators on quarterly basis, Gwadabe added that the list grew to 2,998 from 1,400.

“There are more approvals expected. It is a welcome development,” he said.

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