Foreign currency speculators will in the coming months face huge losses as the Central Bank of Nigeria (CBN) is set to resume dollar sales to Bureaux De Change (BDCs). With over 5,000 BDCs spread across the country receiving weekly allocations for sale to the retail end of the market, and rising accretion to the foreign reserves to over $37 billion, the naira’s future
The naira is facing its greatest risk from the COVID-19 pandemic as currency speculators continue to make spurious demand for dollar with the hope of making good returns from the rising gaps between official and parallel market rates.
Interestingly, the Central Bank of Nigeria (CBN) governor, Godwin Emefiele and President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, have in recent weeks, analyzed the illicit business of currency speculators and the danger they pose to the economy and naira stability.
The two have also warned currency speculators about the looming danger for their trade if they refuse to retrace their steps as they will incur losses estimated at over N 10 billion in the next few months as the CBN prepares for BDCs’ return to the forex market after nearly six weeks of absence due to the COVID-19 pandemic and the need to protect operators.
Emefiele even went a step further appealing to industrialists patronizing the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses, failure which they would equally record same huge losses like the currency speculators.
The CBN governor said, “I know some of you are involved, stop now. By going to the parallel market, you are helping to overheat that market. Not only that, you will lose money because you would have bought it at a price that is not realistic. I can tell you that you are going to lose money. But we have seen your accounts already. We are appealing to you, please stop and let’s do what is right, what is legal, so that Nigeria can continue to be a good place for you to live in.”
Going further, he said, “We are going to provide more liquidity in the market so that people can stop going to the parallel market. Don’t go there because it is not good for you. But be patient, it’s going to be orderly.”
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 management and ABCON team begin to count days for the BDCs return to the market.
The CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile and uncertain times.
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.
