A senior official from the Association of Bureau De Change Operators of Nigeria (ABCON) has attributed the recent depreciation of the Naira to insufficient dollar allocations from the Central Bank of Nigeria (CBN), rather than the actions of Bureau de Change (BDC) operators. On Tuesday, the Naira fell to a new low of N1520.4, with market volatility underscored by a 41% drop in daily turnover, indicating tighter liquidity.
Speaking anonymously, the ABCON official emphasized that the primary issue is the limited supply of dollars from the CBN. He refuted claims that BDC operators are responsible for the recent fluctuations in exchange rates, explaining that only about 30% of licensed operators have recently received dollar allocations from the CBN. This shortfall forces BDCs to source dollars from the parallel market at higher rates, which significantly impacts the rates they offer to customers.
“Most of our members who bid for dollars about four weeks ago are only just receiving their allocations,” the official stated. Over the past three months, BDCs have received only around $40 million from the CBN, far from sufficient to satisfy customer demand.
The official criticized the notion that BDC operators exploit the system by buying dollars at lower rates to sell at inflated prices. He revealed that less than a third of BDCs receive their dollar allocations sporadically and insufficiently, with allocations described as “snail-speed.”
“The volume and frequency of dollar supplies from the CBN are discouragingly low. We often have to source dollars independently,” he added, highlighting the challenges BDCs face due to inadequate support from the CBN.
He also criticized the government’s handling of the forex situation, pointing to broader economic issues and the underutilization of the Autonomous Foreign Exchange Market (AFEM) window. “We often ignore fundamental economic issues in this country and chase after less relevant matters. Such strategies inevitably lead to errors,” he said.
The official emphasized that the depreciation of the Naira is driven by supply constraints and broader economic indicators, including inflation, rather than the activities of BDC operators. “Last year’s N10,000 is barely worth N3,000 to N4,000 today. Due to this uncertainty, many Nigerians are holding onto their dollars as a hedge against inflation.”
This comprehensive account from the ABCON official sheds light on the complex dynamics influencing the Naira’s depreciation, pointing to systemic liquidity challenges and policy timing issues rather than malpractices by currency exchange operators.
The Naira’s steep downturn reflects broader issues within the Nigerian economy, particularly in terms of forex liquidity. Over the past week, the Naira has lost about 11% of its value on the official market, highlighting the substantial hurdles Nigeria faces in stabilizing its currency. Market dynamics on Tuesday revealed the erratic nature of the forex market, with the Naira hitting an intra-day high of N1,568/$1 before dipping to a low of N1,350/$1, suggesting a volatile session influenced by supply fluctuations.
Further complicating the forex scenario is the sharp 41% drop in daily turnover, with market activity plummeting to $128.76 million from $217.64 million recorded the previous day. This dramatic fall underscores the unpredictable nature of dollar supply, which had surged by 91% just the day before.
Despite these turbulent conditions, Nigeria’s foreign exchange reserves have shown some resilience, increasing by $262 million since April 19, 2024. This improvement began around the time the Governor of the Central Bank of Nigeria, Yemi Cardoso, stated that the apex bank would not actively defend the Naira despite a prolonged dip in the country’s reserves. This strategic reserve accumulation could provide some support for the Naira if managed effectively.
