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Tag: parallel

  • ABCON: BDCs not parallel market operators

    ABCON: BDCs not parallel market operators

    The Association of Bureaux De Change Operators of Nigeria (ABCON) yesterday defended Bureaux De Change (BDCs) licensed by the Central Bank of Nigeria (CBN) saying they operate within set rules and are not part of parallel market operators.

    Its President, Aminu Gwadabe, in a statement, distanced ABCON members from the activities of BDC parallel market operators, which he said have constituted major setback to naira’s stability. He insisted that the CBN-licensed BDCs are not parallel market operators as misconstrued by a large section of the public and even top government officials.

    Gwadabe said CBN-licensed BDCs, which are 3,147 operators at present, are key partners of the apex bank in ensuring the stability and competiveness of the naira against world currencies, including the dollar.

    He said licensed operators have been given up to December 31 by the CBN to renew their annual licensing fee of N250,000. He added that they are registered with the Corporate Affairs Commission (CAC)  and with each operator meeting the mandatory N35 million capital base stipulated by the apex bank.

    Gwadabe said Finance Minster, Mrs. Kemi Adeosun severally accused the BDC parallel market operators of contributing to the continuous depreciation of the naira, but insisted the CBN-lisensed BDCs do not fall within the category being described by the minister because they operate based on set guidelines.

    The ABCON chief said the licensed BDCs, not only have their operational offices, they file reports with the Federal Inland Revenue Services (FIRS) and belong to ABCON, which is recognised by the apex bank as the umbrella body for licensed BDCs.

    Gwadabe said his members are committed to naira’s stability at both official and parallel markets, and have consistently partnered with the CBN to achieve this objective.

    “The CBN-licensed BDCs have always played collaborative and positive roles for the regulator in achieving exchange rate stability.

    Besides, CBN’s admission of licensed BDCs into the International Money Transfer Operators- IMTOs-Window foiled analysts forecast for the naira to cross N500 to dollar rate by last December. The licensed BDCs have weekly rate quoted on the Uniform Weekly Exchange Rate for Licensed Bureaux De Change portal.

    He said the rate for this week was N399 to dollar, adding that ABCON has continued to ensure that licensed operators abide by the rate while defaulting members will be sanctioned.

    Gwadabe however, described the BDC parallel market operators or unlicensed BDCs as underground operators, without offices, and which do not render returns to the CBN.

    He said these operators, seen mostly in major streets because they do not have offices, remain the major problem facing the naira.

    “The transactions done by unofficial BDC operators are highly exploitative and lucrative given that they are not bound by any regulation. These set of operators are invisible, and are the ones causing the rising gap between official and parallel market rates,” he said.

    According to Gwadabe, the transactions done by these underground operators are bigger in volume than those of the CBN-licensed operators, and therefore have constituted major roadblock to naira’s stability. He said unlicensed BDCs do not render returns to the CBN, are not registered with the CAC and do not file reports at the FIRS.

  • Naira falls to N324 on parallel market

    The naira yesterday fell by 1.25 per cent to N324 on the parallel market after Emmanuel Ibe Kachukwu, junior Minister for Petroleum raised petrol prices by 67 per cent.

    “People are holding on to their dollars in anticipation of an increase in demand for dollars by oil importers,” President, Association of Bureau De Change Operators of Nigeria (ABCON) Aminu Gwadabe, said.

    However, the naira exchanged at 199.40 to the dollar on the official interbank market, around the 197 official peg rate. “There is dollar scarcity right now in the market, even at 324 naira you can’t find dollar to buy,” one trader told said. Traders said expected pressure from fuel importers could further push down the naira value in the coming days.

    Analysts at FBNQuest said the Petroleum Product Pricing Regulatory Agency’s (PPPRA) product pricing template assumes that all transactions for imports are carried out at the official forex rate, which is problematic.

    They explained that since around 50 per cent of national petrol consumption was previously met by the private sector, the inability of this group, mainly independent marketers, to source forex at the official rate led to an unprofitable venture for many marketers.

    They noted that price modulation is still the preferred pricing mechanism for the government. “Given that price ceilings are still set by the government we cannot conclude that Wednesday’s announcement ushers in full blown deregulation. Price ceilings, they added, will be set in tandem with market realities.”

  • Naira rebounds, exchanges at N300/$ in parallel market

    Naira rebounds, exchanges at N300/$ in parallel market

    The Federal Govern-ment’s insistence not to devalue the naira is paying off, as the local currency firmed yesterday against the greenback, exchanging for between N300 and N310 to the dollar at the close of business.

    It gained about 20 per cent from its Tuesday’s N364 exchange rate to the dollar. A source at the Central Bank of Nigeria (CBN) who asked not to be identified, as he was not authorised to speak on the matter, said the development, “is an affirmation of what the ape bank had stood far, that the naira will eventually find parity with the greenback in due course.” The official said the wide margins in the naira/dollar exchane rate in the past few months were the handiwork of currency speculators.

    The rates yesterday opened at N295 to dollar, moved to N300 and closed at N310 to the dollar in different parts of the country, including Lagos, Abuja, Onitsha and Aba.

    The ongoing rebound of the naira means that the CBN’s drive for exchange rate stability and zero tolerance for currency speculators is already yielding the desired result.  The naira had firmed as retail traders, having anticipated a cut in the official rate and stocked up on dollars, bought the local currency back after the government said it would not devalue.

    The Nation’s findings showed that there was drama yesterday at the Abuja foreign currency market as the Naira kept fluctuating against the dollar. By 9am yesterday at the popular Wuse Zone 4 hub of Bureau De Change in Abuja the Naira started at around N294 to the dollar, appreciated to N247 in the afternoon and by 4:30pmwas trending around N200 to the dollar.

    However, within a space of five at the Zone 4 Plaza currency market, The Nation first learnt that the Naira was N260 to the dollar at 5:52pm and four minutes later, it had depreciated to N295 to the dollar.

    The unpredictability of the value of the Naira has kept Nigerians and Abuja residents in particular on edge and has remained a trending topic all over the city.

    However, the official exchange rate has closed at N197.50 following CBN’s curbs introduced late last year to defend a currency peg have restricted access to dollars. The policy shift has moved demand for dollars on to the parallel market, a flow further fuelled by speculation of a possible weakening of the peg.

    On Saturday, President Muhammadu Buhari rejected the idea of devaluing the naira, despite mounting pressure from an economic crisis caused by a sharp fall in the price of oil, Nigeria’s dominant export. The parallel market naira had risen on Monday and Tuesday, and its gains gathered pace yesterday.

    “The market is reacting to the president’s ‘no devaluation’ stance,” Aminu Gwadabe, who is the President, Association of Bureau De Change Operators of Nigeria (ABCON) said.  Authorities had stepped up efforts to rid the market of illegal currency traders, he added.

    He said the many BDC operators are not sure the liquidity in the market will continue, urging government to enhance more liquidity in the market to bring the rates further down.

    Gwadabe said the association was advising members to issue receipts to customers for foreign currency transactions in order to improve transparency and curb speculation. He explained  that the group was working to introduce a single quote across the parallel market and maintain a bid-ask spread of 3.5 percent. The unofficial market still accounts for less than five per cent of Nigeria’s currency trades.

    Also speaking, ABCON Chairman for North-West Kano Region, Alhaji Mustapha Yakubu said BDC operators in Kano have lost huge money after the rates felled. He also urged the government to improve market liquidity.

  • Naira weakens against dollar at parallel market

    Naira weakens against dollar at parallel market

    The Naira on Monday depreciated by 0.8 per cent to exchange at N265 to the dollar at the parallel market.

    The News Agency of Nigeria (NAN) reports that the greenback lost N2 to the dollar from its weekend value of N263.

    However, at the official interbank window, the Naira exchanged at N197 to the dollar.

    Traders at the market were hopeful that the Naira would rebound in 2016 if the apex bank continued to enforce its policies at the foreign exchange market.

    Besides, the price of crude oil at the international market hedged up to 38.9 dollars per barrel from about 35.7 dollars per barrel at the weekend.

    Oil prices rose on Monday after a breakdown in diplomatic ties between Saudi Arabia and Iran that some speculated could result in supply restrictions.

    Saudi Arabia, the world’s biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran following Riyadh’s execution of a prominent Shi’ite cleric on Saturday.

  • CBN to pump $90m into parallel market

    CBN to pump $90m into parallel market

    The Central Bank of Nigeria (CBN) is expected to shut the official foreign exchange (forex) window for the year by Wednesday and pump $90 million into the parallel market, it was learnt yesterday.

    This week’s parallel market intervention is expected to curb prevailing naira volatility in the market. The naira last week exchanged at N280 to a dollar after the CBN supplied only $23 million to Bureaux De Change (BDC) operators, $67 million short of the expected $90 million.

    Association of Bureaux De Change Operators of Nigeria (ABCON) President Aminu Gwadabe, who said he had heard about the plan, said the apex bank will meet this week’s forex demand to avoid a repeat of last week’s crisis.

    “I think the CBN has learnt its lessons and will supply $90 million to the market. This translates to $30,000 for each of the 3,000 BDCs. That is the only way the naira will begin to rebound in the parallel market. It is currently exchanging at N263 to one dollar in Lagos and Abuja,” he said.

    The parallel or black market has been sustained by the significant differences in the naira exchange rates against international currencies. With nearly N70 gap between the official and the parallel market rates, there has been a lot of room for players to make easy profit.

    Though primarily funded by travellers and Nigerians living abroad who remit funds home, many banks have profited illegally by selling forex obtained through official sources to the black market through a process known as round tripping.

    Gwadabe also said the high level of forex volatility recorded in the parallel market last week, was fuelled by the inconclusiveness of the CBN’s plans to permanently stop supplying dollar to the BDCs.

    He disclosed that the market volatility was also worsened by banks recalling loans given to forex speculators as the year gradually runs to an end.

    He attributed the naira rebound to people who kept large volume of dollars, but rushed to take advantage of high prices. It is estimated that about $5 billion are held by people waiting to take advantage of price changes.

    CBN Director, Monetary Policy Department, Moses Tule, said the naira was under pressure because of the actions of speculators.

    He said currency speculators are taking positions on the naira, with a view to making excess gain from currency trading.

    Tule said currency speculators were determined to put severe pressure on the monetary authorities and make the apex bank buckle and further devalue the naira.

    According to him, the CBN would not fold its arms while economic predators feast on the nation’s commonwealth through arbitrage.

    While maintaining that the only rate in the currency market is N196.47 to dollar, he wondered why indigenous operators in the Bureau de Change (BDC) segment of the market chose to make huge profits at the expense of customers in genuine need of the currency.

    Tule lamented that while international operators, such as Travelex, traded at not more than N7 above the rate, indigenous operators preferred to make excessive profits.

    “We know what the fundamentals of the economy are and we will continue to take the right economic decisions on what to do and not when people sitting out there speculating on the currency think the naira should be devalued, so that they could make profit out of it,” he said.

    “No country quotes its exchange rate with reference to the BDCs rates. The currency has a reference rate and that is the interbank exchange rate,” he said.

    Tule urged Nigerians to be more patriotic in their dealings rather than engage in activities capable of undermining the integrity and value of the naira, adding that the media had a role to play in assisting the CBN to curb speculation on the naira.