FOREX: CBN MAKES DEMANDS ON BUREAUX DE CHANGE OPERATORS

The Central Bank of Nigeria (CBN) should issue a directive mandating non-oil exporters to hold foreign currencies for a minimum of 48 hours, according to a proposal made by the Association of Bureaux de Change Operators of Nigeria (ABCON).

Aminu Gwadabe, president of ABCON, stated the organization's stance in a statement that was made public on Thursday. The CBN's recent crackdown on the use of deposits from non-oil export get naira loans is supported by the statement.

This comes right after the CBN ordered on April 8 that all banks stop taking foreign currency collateral for naira loans.

As part of the bank's risk management plan, the financial regulator has mandated that all current loans backed by foreign currency collaterals be reconciled within 90 days or else be subject to a computation of 150 percent.

Gwadabe's comments demonstrate ABCON's backing of the CBN's initiatives to improve market stability and expedite FX transactions.

“It is a commendable step towards adding dollar liquidity to the market that the CBN has directed that the use of the non-oil export domiciliary accounts deposits for naira loans be discontinued,” Gwadabe said.

He went on to say that imposing a requirement for foreign currency holding periods in domiciliary accounts might greatly increase the amount of dollars available in the local exchange market.

“We find it astonishing that certain corporations and producers, possessing enormous billion-dollar reserves in their non-oil export Dom accounts, obtain their foreign exchange requirements through the official channel and apply it to naira loans,” Gwadabe said.

Therefore, we suggest reviewing the regulations governing the maximum 48-hour currency holding period on non-oil export accounts, taking a cue from the South African policy governing the management of non-oil export Dom account proceeds.

“Applicants holding billions of dollars in non-export oil proceeds in Dom accounts should not be eligible to request foreign exchange at the Nigerian Autonomous Foreign Exchange Market (NAFEM) or through the Nafex window, according to the CBN.”

To boost investor confidence, Gwadabe also urged the CBN to pursue legislative support for its BDC reform plans and circulars.

To provide comfort and assurances to potential investors in the BDC industry's sub-sector transformation, he said, “we urge the CBN to upgrade its policies and circulars to legislation regarding the impending BDCS new reforms.” Additionally, he said, “only the existing stakeholders the grants father's right for merger and acquisition to meet the expected reviewed financial requirements as suggested by ABCON,”

Additionally, we would want to reaffirm our commitment to supporting the CBN's aggressive and successful measures in addressing the challenges posed by volatility.

The self-regulatory body Gwadabe went on to say that in order to promote price discovery, market efficiency, transparency, the accretion of buffers, and a healthy balance of payments, its members have decided to keep interacting with all parties involved in the retail end of the market.

Since we have not only brought both rates closer together but also restored market stability and the confidence of both domestic and foreign investors, we thus implore the CBN to keep pushing and broadening its thought process in order to sustain the accomplishment that has been made possible in over 15 years, he stated.

“We further demand that FMDQ's ownership and operational structure be kept apart.”