Forex: Hope rises for Naira as reserves recover at $37bn

.Speculators to lose over N10bn as CBN, ABCON finalise BDCs resumption

Following the rising accretion to the foreign reserves to over $37 billion, the Nigerian currency, naira future looks bright. To this end, foreign currency speculators will in the coming months face over N10 billion losses as the Central Bank of Nigeria (CBN) and Association of Bureaux De Change Operators of Nigeria (ABCON) finalize plans to resume dollar sales to Bureaux De Change (BDCs). With over 5,000 BDCs spread across the country receiving weekly allocations for sale to the retail end of the market,

ABCON, however, warned forex speculators to retreat their steps or get ready to lose their life savings and businesses as the CBN has the financial muscles to sustain dollar interventions to businesses, economy to keep the naira stable in line with its exchange rate stability mandate.

The naira is facing its greatest risk from the coronavirus pandemic, as currency speculators continue to make spurious demand for dollar with hope to make good returns from the rising gaps between official and parallel market rates.

Interestingly, the CBN Governor, Godwin Emefiele and President of ABCON, Alhaji Aminu Gwadabe have in recent weeks, analyzed the illicit business of currency speculators and the danger the pose to the economy and naira stability.

Both leaders have also warned the currency speculators about the looming danger for their trade if they refuse to retrace their steps as they will incur losses estimated at over N 10 billion in the next few months as the CBN prepares for BDCs return to the forex market after nearly six weeks of absence due to the Coronavirus pandemic and need to protect operators.

The fact remains that currency speculators will lose huge funds that will likely be the beginning of the ending for their illicit businesses as the apex bank will soon begin dollar sales to over 5,000 BDCs operating across major cities nationwide.

Emefiele even went a step further appealing to industrialists patronizing the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses, failure which they will  equally record same huge losses like the currency speculators.

Both Emefiele and Gwadabe have huge experiences in the market to predict what follows after every major crisis.

Like in 2016 currency crisis, the market got a major relief after the BDCs’ began getting dollar allocations from the CBN. That same scenario will soon play out as the CBN team and ABCON Management begin to count days for the BDCs return to the market.

The CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile and uncertain times. That’s especially true now that the local currency has come under intense pressure that is purely driven by speculative demand for the dollar. The BDCs are essentially operators that help get dollars to the end users no matter where they are and have for decades proven time and time again their relevance in stabilizing the naira.

Gwadabe said the CBN-licenced BDCs will soon start full operations as the apex bank will soon reopen dollar sales to operators.

According to him, with the CBN’s planned lifting of moratorium on dollar sales to BDCs, reopening of the airports for air travels,  global ease on restriction of movement are positive indications that dollar flows to the economy will soon improve.

He said the naira has been exchanging at N461 to dollar at the parallel market but will be upbeat once dollar sales to BDCs commence. 

He said: “The return of over 5,000 BDCs to the forex market will add great strength to the  Naira and lead to major capital losses for forex speculators. It happened in 2016 and will happen again in 2020. The return of the BDCs will immediately boost Naira recovery and put the enemies of the economy to shame. We are committed to the CBN’s exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable,” he assured.

Gwadabe said the return of BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.