A senior representative of the Association of Bureau De Change Operators (ABCON), who preferred to remain unnamed, provided insight into the Naira’s continued devaluation, indicating that a lack of supplies was a major factor driving it down.
The official also vehemently denied assertions made by some quarters that the recent changes in exchange rates are the fault of BDC operators.
On the official market, the Naira dropped to N1520.4 on Tuesday, its lowest level since March 20. Additionally, May’s daily turnover was noticeably smaller than it was in the previous months, indicating that the foreign currency market’s liquidity is getting tighter.
The ABCON representative stressed that the Central Bank of Nigeria’s (CBN) reduced dollar allotments, not the BDC operators, are the primary cause of the depreciation.
He highlighted the difficulties this presents for the remaining licensed operators when he said, “The CBN last provided dollars to only about 30% of licensed operators.”
BDCs are forced to obtain dollars at higher rates from the parallel market due to insufficient allocation from the CBN, which has a substantial impact on the rates they provide to consumers.
The official said, “Most of our members who bid for dollars about four weeks ago are only just receiving their allocations,” in response to the distribution delays.
He also revealed that, in the last three months, they have only gotten about $40 million from the apex bank—a sum that is far insufficient to meet client demand.
The official addressed the notion that BDC operators purchase dollars at official rates that are lower than market value to resell them at higher prices. He went on to say that fewer than one-third of BDCs had gotten their dollar allocations from the CBN and that the majority had only received them insufficiently and irregularly.
“The CBN’s dollar supply volume and frequency are depressingly low. We frequently have to find money on our own.”
“In the past three months, we haven’t received more than $30 to $40 million in total,” he said, calling the allocation pace “snail-speed.”
“We often ignore fundamental economic issues in this country and chase after less relevant matters,” he said, criticizing the government’s handling of the situation. Errors are inevitable with such tactics.
The official, speaking about more general economic difficulties, mentioned systemic problems that went beyond the FX market.
The liquidity concerns lie at the heart of the fundamentals, as everyone is aware. There is insufficient use of the Autonomous Foreign Exchange Market (AFEM) window. He asked, “Why isn’t there more focus on what’s going on there, or do they believe BDCs operate in isolation from the rest of the economy?”
The official said, “Imagine receiving just $10,000 over four weeks,” in response to a question regarding the high selling rates. Given the demand, that quantity cannot possibly last for very long. It is obvious that we need to find more funding to cover ongoing needs.
He underlined that factors other than BDC operations, such as supply limitations and larger economic indicators, also influence market dynamics.
He went on to emphasize how inflation affects the value of currencies. The N10,000 from last year is only worth N3,000 to N4,000 now. Many Nigerians are hoarding their dollars as a hedge against inflation as a result of this unpredictability.
This in-depth analysis by a top ABCON official clarifies the intricate dynamics driving the depreciation of the Naira, pointing away from currency exchange operator malfeasance and toward systemic liquidity problems and policy timing concerns.
Forex issues still exist
This sharp decline is a reflection of larger problems in the Nigerian economy, namely with regard to foreign exchange availability. The Naira has lost around 11% of its value on the official market in only the past week, highlighting the significant challenges Nigeria has in stabilizing its currency.
The Naira reached an intraday high of N1,568/$1 before falling to a low of N1,350/$1, demonstrating the volatile character of the forex market that day. These swings point to a tumultuous session when buybacks or corrective movements may have offset early sell-offs.
The steep 41% decline in daily turnover on the same day, when market activity fell to $128.76 million from $217.64 million the day before, further complicated the FX position.
This sharp decline emphasizes the erratic character of the dollar supply, which had increased by a noteworthy 91% only the day before, highlighting the volatile dynamics of supply in the official market.
Nigeria’s foreign exchange reserves have exhibited considerable tenacity in the face of these volatile circumstances, having climbed by $262 million since April 19, 2024.
This recovery started about the time that Yemi Cardoso, the governor of the Central Bank of Nigeria, said that the Naira would not be actively supported by the central bank in spite of a protracted decline in the nation’s reserves. If handled well, this build-up of strategic reserves can offer some support for the Naira.
