The stability of the naira is in jeopardy, according to Bureau De Change (BDC) operators, who claim they are not receiving dollars from commercial banks as instructed by the Central Bank of Nigeria (CBN).
BDCs are struggling with poor margins, less favourable offer rates, fewer collaborating banks, limited forex availability, and business uncertainty, according to Aminu Gwadabe, head of the Association of Bureaux De Change Operators of Nigeria (ABCON).
He pointed out that these elements have worked together to encourage speculative activity and currency substitution, which has caused the naira to depreciate.
In the parallel market, sometimes known as the black market, the value of the naira fell precipitously, quoting at 1,580/$ on Thursday and Friday, down 3.5 percent or N55 from 1,525/$ on Wednesday.
Since the dollar was quoted at 1,542/$ on Friday instead of 1,499/$ on Monday, the naira lost 43/$ on the official foreign exchange (FX) market.
According to data from FMDQ Securities Exchange Limited, the naira lost value as the dollar was valued at N1,512.30 compared to the previous closing of N1,500.80 at the NFEM.
Falling T-bill Yields
Following a spike in market liquidity and a drop in inflation rates, Nigerian Treasury bill yields have experienced a significant fall.
A decrease in yield will result in less Foreign Portfolio Investment (FPI) inflows, which will lower foreign exchange (FX) inflows into the nation, according to Ayodeji Ebo, an investment professional and managing director/CBO at Optimus by Afrinvest.
“In addition, with anticipation of reduced interest rates, investors are scrambling to lock in present attractive rates, lowering available cash for speculative activity or dollar-denominated assets. Consequently, this restricts the demand for foreign money and could affect the dynamics of the exchange rate,” he stated.
Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., responded that while there are some reasons why the naira is dropping to a new low, the slow drop in yields is one of them.
“We are dealing with speculation and speculators,” stated Tilewa Adebajo, CEO of The CFG Advisory.
BDC’s Worries
Gwadabe expressed concern about some limitations that BDC operators face, cautioning that these difficulties are undermining trust in the FX market structure.
Gwadabe advised the CBN to refine its BDC interventions in the retail foreign exchange market to solve these issues. Additionally, he demanded that licensed operators import dollar cash and that banks’ dollar sales to BDCs be transparently monitored.
“By adjusting retail market interventions, approving dollar cash imports to authorised operators, and establishing a system for open bank dollar sales to BDCs, the apex monetary authorities must maintain their magic wands,” he stated.
He urged fiscal authorities to continue, in addition to monetary measures, to lower the fiscal deficit, increase productivity, improve forward communication, and guarantee efficient information flow.
Gwadabe further emphasized that addressing rising prices is essential for long-term economic growth and poverty reduction. He also encouraged the federal, state, and other institutions to proclaim a state of emergency on inflation.
“In order to support stability in the foreign exchange market, operators must, above all, embrace the new reforms and ensure strict compliance,” he continued.
According to a BDC operator who asked to remain anonymous, he and his colleagues are not receiving cash from the banks.
The NFEM was temporarily made available to BDCs by the apex bank from December 19, 2024, to January 30, 2025; however, it was later extended until May 30, 2025.
The BDCs will be permitted to trade up to $25,000 weekly, subject to a maximum spread of 1 percent and requiring upfront funding at prevailing rates.
