• Thursday, March 28, 2024
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BusinessDay

BDCs urge CBN to address huge exchange rate mismatch in FX market

BDC operators embark on crisis resolution

The Bureau De Change (BDC) operators through their association have called on the Central Bank of Nigeria (CBN) to address the huge exchange rate mismatch in the forex market.

Association of Bureaux De Change Operators of Nigeria (ABCON) made the call in its quarterly economic review report for the third quarter of the year (Q3’2020).

“It is illogical to intervene in the market at N380 when open market is moving at N460. Who takes the margin? This is an exchange rate mismatch. The solution to the problem is not throwing millstones or blackmail of any sub-sector of the market, the margin ends in one market and is functional to the volume to satisfy market deficit in supply,” the association stated.

Naira on Tuesday remained stable as the dollar traded at N458. The local currency weakened by N2 against the dollar, which sold for N459 on Tuesday as against N457/$ on Monday.

At the Investors and Exporters (I&E) forex window, Naira remained stable at N386.00 per dollar. Analysts at FSDH research said most participants maintained bids between N384.00 and N392.89 per dollar.

ABCON also advised the CBN to consider raising the liquidity ratio of banks to discourage foreign currency holding and thereby increase availability of forex especially for the purpose of increasing liquidity at the official retail segment where BDCs operate.

On the other hand, ABCON, called for increased cooperation among BDC operators so as to attract autonomous foreign exchange inflows facilitated by the reopening of the economy.

“Operators are set to make windfalls as foreign currency arrears coming from the long business lockdown are reopening. Traders through cooperation can attract huge autonomous foreign exchange volume through interplay of fine exchange rate margins from the liquidity in the open market,” the Association stated.

The Association also cautioned the CBN against pegging of the interest rates and other variable, stressing that this can lead to malfunctioning of the system.

The Association instead, recommended that the monetary authority should intervene in selected priority sectors through incentives, adding that this will allow for smooth flow of the whole economy, especially when complemented with fiscal management efforts.

ABCON has cautioned against increasing the retirement age, saying it works against policies to reduce youth unemployment in the country.

It said the Federal Government should prepare post retirement facilities instead of increasing retirement age.

The Association’s position is against the backdrop of the recent decision of the federal government to increase in the retirement age of teachers from 60 years to 65 years.

“Increasing workforce retirement age is counterproductive under conditions of high youth unemployment rate, instead government should prepare solid post retirement facilities”, the Association stated, adding that the FG should promote policy to reduce youth unemployment with a view to addressing social unrest.

While noting that recovery from the severe impact of the COVID-19 pandemic on the nation’s economy will be determined by a structured and people-oriented policy aimed at resolving the macroeconomic imbalance arising from the disruptions, ABCON advised that, “Government spending should be directed towards business recovery, poverty alleviation and infrastructure development but structured to give a good mix with monetary policy trust.