In a recent development shedding light on the fluctuating fortunes of the Nigerian Naira, a senior official from the Association of Bureaux De Change Operators of Nigeria (ABCON) has pinpointed insufficient dollar allocations from the Central Bank of Nigeria (CBN) as the primary driver behind the currency’s recent depreciation. Contrary to popular belief, the official emphasized that the actions of BDC operators were not the root cause of the Naira’s decline.
Speaking candidly, the ABCON official disclosed that the CBN had only allocated dollars to around 30% of licensed operators, leaving the majority grappling with severe shortages. This scarcity forces BDCs to resort to sourcing dollars from the parallel market at inflated rates, inevitably impacting the rates they offer to customers.
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Expressing frustration over the meager allocations, the official revealed that ABCON members had received a paltry sum of around $40 million from the CBN over the past three months, a far cry from the demand. This dearth of supply, coupled with sporadic and insufficient allocations, exacerbates the liquidity crunch faced by BDCs and contributes to the Naira’s depreciation.
Addressing misconceptions about BDC practices, the official debunked notions that operators buy dollars at lower official rates to sell at inflated prices, revealing that less than a third of BDCs had received their allocations from the CBN, and even those were inadequate.
The official lamented the sluggish pace of allocations, criticizing the government’s handling of economic issues and urging a more focused approach to address fundamental challenges. He highlighted systemic liquidity issues beyond the forex market, emphasizing the underutilization of the AFEM window and urging attention to broader economic indicators.
Responding to concerns about high selling rates, the official stressed the impact of supply constraints and broader economic factors, including inflation, on currency value. He underscored the importance of addressing these structural challenges to stabilize the Naira effectively.
The official’s comprehensive analysis provides valuable insights into the complex dynamics underlying the Naira’s depreciation, shifting the focus towards systemic liquidity challenges and policy timing issues rather than malpractices by currency exchange operators.
The article also discusses the broader economic implications of the Naira’s depreciation, highlighting the challenges Nigeria faces in stabilizing its currency amidst fluctuating forex liquidity. Despite the erratic nature of the forex market, Nigeria’s foreign exchange reserves have shown some resilience, potentially offering support for the Naira if managed effectively.