The naira is facing its greatest risk from the coronavirus pandemic, as currency speculators continue to make spurious demand for dollar with hope to make good returns from the rising gaps between official and parallel market rates.
During the short period that the CBN stopped the sale of forex to bureau de change houses, speculators cashed in on the supply gap created to begin currency speculation, demanding forex for hoarding in the hope of selling at a much higher price in the future. This has driven the naira downward in terms of value and strength. This underlined the renewed partnership between the Central Bank of Nigeria (CBN) and the Association of Bureaux de Change Operators of Nigeria (ABCON), with the Gowin Emefiele, CBN governor, and Aminu Gwadabe, ABCON president, analysing the illicit business of currency speculators and the danger they pose to the economy and naira’s stability.
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Both leaders have estimated the potential loss of the currency speculators at over N10 billion in the next few months as the CBN prepares BDCs return to the forex market after about six weeks of absence due to the Coronavirus pandemic and the need to protect the operators. There is no doubt that the currency speculators are bent on undermining the naira and many years of CBN’s efforts to stabilise the naira.
Governor Emefiele has started the consultation process to drive the speculators out of business by appealing to industrialists patronizing the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses, as doing so will not only affect their businesses but also them unviable in the long run.
Both Emefiele and Gwadabe have huge experiences in the market to predict what follows after every major crisis.
During the 2016 currency crisis, the market got a major relief after the BDCs’ began getting dollar allocations from the CBN. That same scenario will soon play out as the CBN team and ABCON management begin to count days for the BDCs return to the market.
The dangerous game of the currency speculators has brought to the fore the crucial role of the BDC operators in the supply management of forex and ensuring naira stability. If left to the wiles of the speculators, naira’s free fall is a fait accompli. That’s especially true now that the local currency has come under intense pressure that is purely driven by speculative demand for the dollar. The BDCs are essentially operators that help get dollars to the end users no matter where they are and have for decades proven time and time again their relevance in stabilizing the naira.
Happily, Gwadabe said the CBN-licenced BDCs will soon start full operations as the apex bank will soon reopen dollar sales to operators. According to him, with the CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels, global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.
He said the naira has been exchanging at N461 to dollar at the parallel market but will be upbeat once dollar sales to BDCs commence.
He said: “The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators. It happened in 2016 and will happen again in 2020. The return of the BDCs will immediately boost Naira recovery and put the enemies of the economy to shame. We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable,” he assured.
Gwadabe said the return of BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.
Africa November 4, 2019