ABCON Backs Ban on FX Collateral for Naira Loans

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe has said that the Central Bank of Nigeria (CBN) directive stopping the use of Non Export Domiciliary Account Collateral for naira loans will boost dollar liquidity, support reserves accretion and strengthen the financial services sector.

In a statement on the apex bank policy and impact on the forex market, the Gwadabe described the move as a welcome development, expected to put the excesses of big businesses and manufacturers putting unnecessary pressure on the forex market on check.

He said: “ABCON members are bewildered that some companies and manufacturers with billions of dollar balances in their non-oil export domiciliary accounts use it as collateral for naira loans and still source forex in the official window thereby depleting what is available for other operators.”

“The stoppage of this unprofitable practice will not only add to the dollar liquidity in the market but also help in the accretion of foreign reserves buffers,” he added.

He advised the CBN not to approve forex requests by manufacturers and other business applicants with billions of dollars holdings in Non export oil proceeds domiciliary accounts at both the NAFEM and NAFEX window.

The ABCON boss explained that unfortunately, the BDCS are most times seen as crude but remains an effective market control mechanism with the potent transmission mechanism tool in achieving the CBN’s mandate of price stability and liquidity in the markets.

“We therefore urge the CBN to continue to drive and expand its operations to ensure that the best results now achieved in the last 15 years is maintained and also ensured exchange rate convergence, market calmness and confidence of the public and foreign investors,” he said.