Forex crisis: BDC operators set FX rate at N399/$1

As financial stakeholders await the outcome of the meeting between the Central Bank of Nigeria (CBN)’s officials and the Bureau De Change (BDC) operators in the country, the retail currency traders yesterday fixed their first-ever reference exchange rate for the local currency at 399 to the dollar.

With this development, forex dealers believed it would reduce the wide gap between the official interbank and retail foreign exchange rates.

However, in the recent time, the federal government has been consistently pressing retail operators to narrow what it says is a damaging gulf between the naira’s official rate – currently at 305 to the dollar – and the parallel market rate – as weak as 490 per dollar.

But the President, Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe, who met with the apex bank officials yesterday, said his members had agreed to set a weekly reference rate to improve liquidity and help rebuild investors’ confidence in the economy.

“Once liquidity improves, the wide margin between the parallel and official market rates will be bridged,” Gwadabe told reporters.

He explained that the Nigerian currency has a promising outlook, as crude prices continue to rise. However, low prices have dried up the oil income that makes up 70 percent of government revenues, cutting the dollar supply and pushing Africa’s largest economy into recession.

BDC operators account for less than 5 percent of total foreign currency trading in Nigeria. But with liquidity poor on the official market due to low oil revenues and the central bank left as the main dollar supplier, the retail currency traders have done more business.

Gwadabe said the body was seeking approval from the apex lender to access dollars from exporters and has recommended suspension for some of its members for failing to submit documents on forex purchases from money transfer agents.

The naira lost a third of its official value against the dollar in 2016 after the bank scrapped a peg in a bid to alleviate dollar shortages. On the black market, the naira is worth about 40 percent less than the official rate. It closed at N490 to the dollar yesterday, the same rate it traded on Monday.