CBN, ABCON move...

transparency and competitiveness.

Positive indicators for naira recovery

Aside positive developments in the global economy, the CBN has taken action to address the risks facing the naira, which will lead to rapid recovery for the local currency.

For instance, the recovery in the Chinese manufacturing sector and opening of the Asian tiger’s economy after months of closure due to the coronavirus pandemic have raised the country’s crude oil demand, leading to patronage of the Nigerian crude. Such purchases will boost Nigeria’s dollar earnings.

Besides, Nigeria is one of the few lucky countries that have secured emergency $3.4 billion loan from the International Monetary Fund (IMF) under the Rapid Financing Instrument (RFI). This fund will not only support Nigeria’s financial sector and address balance of payment hitches, it has boosted foreign reserves and financing to the budget for targeted and temporary spending increases.

Nigeria’s foreign reserves have reached over $37 billion, which represents enough buffers for the CBN to deal with any act of illegal economic behaviour like hoarding, speculation, conversion of local assets among other illicit financial activities.

Gwadabe also added that the OPEC measures on sustainable price stability are commendable as many governments across the world have agreed to oil production adjustment targets and continued collaboration with all their partners, a move that will benefit Nigeria.

He said the CBN has also officially reviewed the naira exchange rate to N380 to a dollar. Aside devaluing the naira, the apex bank also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378, all aimed at attracting Foreign Portfolio Investment and strengthening the local currency. The BDC operators are expected to buy dollar from the CBN at N378 per dollar.

Gwadabe said the naira rate review and assurances by the CBN Governor, Godwin Emefiele to foreign investors that want to repatriate their funds from the country are positive for the naira continued recovery.

Reopening guidelines for BDCs

Gwadabe said ABCON is issuing their reopening guidelines to all its members nation wide to include on-boarding on the queuing crowd ticketing management application by all members known as ABCON 360°QSM portal with over 80 per cent members registered nation wide so far.

“We are also updating all regulatory obligations during the lockdown, fumigation of members offices/ markets, distribution of second phase of face mask nation wide to our members. There is also the provision of wash hand basins, sanitizers at our distributions centres while members are to explore school fees, mortgage, subscription payments as one of their allowable scopes during post COVID-19,” he said.

ABCON boss Gwadabe said the impact of the coronavirus pandemic on the naira was not as bad as seen in other African countries’ currencies.

Amid huge capital flow reversal driven by risk-off sentiment, currency rates of African countries shows that the South African rand is the worst hit, down 20.6 per cent year-to-date .

This is followed by the Angolan Kwanza which has depreciated by 16.1 per cent, Mauritius Rupee (-8.8 per cent), Nigerian Naira (-6.6 per cent) and Kenyan Shilling (-5.3 per cent) followed in that order. Others include the Tunisian Dinar (-3.8 per cent), Morocco’s Dirham (-2.7 per cent) and the West African Monetary Union’s CFA franc (-2.3 per cent ). Notably, the Egyptian Pound, up 1.3 per cent year-to-date, remains the best performer across the region.

Gwadabe explained that while an adjustment of the Nigerian naira from N360/$ to N385/$ broadly reflects the 6.6 per cent weakness observed in the official market, it must be noted that currency depreciation at the unofficial market is much deeper, currently at N461/$.

But looking ahead, the outlook for the naira is expected to remain relatively strong on the back of growing foreign reserves at over $37 billion, increasing global demand for crude oil, rising commodity prices and rising global trade.

CBN’s message to parallel market Patrons

Emefiele has warned domestic and foreign investors against patronising the unofficial market, saying it was helping to overheat that market.

Dollar sales have since resumed following a phased easing of the lockdown but end users currency demand is yet to be met, analysts say.

Emefiele, has warned firms and individuals against patronizing the parallel market, popularly called the black market.

He warned them to stop using black markets for foreign currency exchange, adding that patronizing the parallel market is helping to overheat the foreign exchange market.

“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 account 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 and to live in,” Emefiele appealed to businesses patronizing parallel market.

Going further, he said, “We are taking note of some of you and I can tell you, go ahead and do your business, nothing will stop your forward, your forward will be at a committed price, 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’’.

ABCON’s Commitment to Exchange Rate Stability

Gwadabe disclosed that ABCON Executive Council under his leadership will continue to promote transparency and efficient market dealings while commending the CBN Management for its progressive policies and achieving stable exchange rate that aligns with its price stability.

He said the CBN has been able to create a people-focused Central Bank promoting macro-economic objectives such as low inflation and a stable exchange rate, along with a focus on promoting inclusive growth and reducing unemployment in the country.

Gwadabe said the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy. He said that Nigerian BDCs, like their counterparts in other emerging or developing economies, have what it takes to deepen the forex market through the deployment of technology and adhering to global best practices.