Forex: Bureaux De Change Operators Make Demand From CBN

The Association of Bureaux de Change Operators of Nigeria (ABCON) has proposed that the Central Bank of Nigeria (CBN) issue a directive requiring non-oil exporters to retain foreign currencies in their domiciliary accounts for a minimum of 48 hours.

ABCON’s president, Aminu Gwadabe, announced the association’s position in a statement released on Thursday. The statement endorses the CBN’s recent clampdown on the use of non-oil export domiciliary account deposits to secure naira loans.

This development follows closely on the heels of a directive issued by the CBN on April 8, mandating all banks to discontinue accepting foreign currency-denominated collaterals for naira loans.

The financial regulator has stipulated that all existing loans backed by foreign currency collaterals must be reconciled within 90 days or subjected to a 150 percent capital adequacy ratio computation as part of the bank’s risk management strategy.

Gwadabe’s remarks highlight ABCON’s support for the CBN’s efforts to streamline forex transactions and enhance market stability.

“The directive from the CBN to stop the use of the non-oil export domiciliary accounts deposits for naira loans is a commendable step towards adding dollar liquidity to the market,” Gwadabe stated.

He further elaborated that enforcing a mandatory holding period for foreign currencies in domiciliary accounts could significantly boost the availability of dollars in the local exchange market.

“We are bewildered that some companies and manufacturers with huge billions of dollars balances in their non-oil export Dom account source their FX needs in the official window and use the same for naira loans,” Gwadabe said.

“We therefore advise for the review of the guidelines on holding currencies on non-oil export accounts to a maximum of 48 hours, to borrow from the South African policy on the operations of non-oil exports Dom account proceeds.

“The CBN should also not make applicants of huge billions of dollars holding on their non-export oil proceeds Dom accounts eligible for FX request at both the Nigerian Autonomous Foreign Exchange Market (NAFEM) and Nafex window.”

Gwadabe also called on the CBN to seek legislative backing for its policies and circulars on BDC reforms in order to improve investors’ confidence.

“In the same vein we urge the CBN to upgrade its policies and circulars to legislation regarding the impending BDCS new reforms to give comfort and guarantees to would be investors in the transformation of the BDC industry’s sub-sector and allowing only the existing stakeholders the grants father’s right for merger and acquisition to meet the expected reviewed financial requirements as suggested by ABCON,” he said.

“We also want to pledge our continuing support to the CBN’s proactive and effective policies to address our volatility headwinds.”

Gwadabe further said as a self-regulatory body, its members have resolved to continue engaging all stakeholders and players in the retail end market to deepen, liberalise, democratised and centralise the retail end segments of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments.

“We therefore urge the CBN to continue to drive and expand its thought mechanism to maintain the feat so far achieved in more than 15 years; as we have not only achieved the convergence of both rates, but market calmness and confidence of the public and foreign investors,” he said.

“We also call for the separation of the ownership and operational structure of FMDQ.”