- Recovery of the naira leads to decreased prices of goods and services across Nigeria, according to ABCON.
- ABCON attributes naira’s resurgence to CBN’s decision to allow BDCs in the forex market after reinstating them in February.
- Naira’s stability contributes to lower costs, with examples including reduced school fees, medical tourism expenses, and airfare prices, fostering public confidence and market liquidity.
According to the Association of Bureaux de Change Operators of Nigeria (ABCON), the recent recovery of the naira has led to a noticeable decrease in the prices of goods and services across the country.
ABCON President Aminu Gwadebe, in a statement issued on Saturday, attributed this positive development to the Central Bank of Nigeria’s (CBN) decision to allow Bureaux de Change (BDCs) to participate in the foreign exchange market. Gwadebe highlighted this as a major factor in the naira’s resurgence.
The CBN had previously banned BDC operations in July 2001 as part of a strategy to stabilize the local currency. However, ABCON had persistently advocated for BDCs to be formally reintegrated into the forex market.
In February of this year, the apex bank finally reinstated BDCs as official forex participants. The ABCON president’s statement credits this move, along with tighter monetary policies that resulted in interest rate hikes and increased investment in government instruments, with significantly boosting dollar liquidity at the retail forex market.
Gwadabe further noted that “the current development in the foreign exchange market has started reining in inflation,” with the prices of most necessities becoming “relatively lower in the market.” He emphasized the positive impact on public confidence in the naira, eliminating the prior prevalence of currency substitution which had put additional strain on the local currency.
“The reconsideration of BDCs into the mainstream foreign exchange market has not only demystified illegal economic behaviours such as hoarding, rent-seeking, round-tripping, and FX holding positions but also led to the emergence of exchange rate convergence,” Gwadebe added.
He pointed to specific examples of the naira’s recovery translating into lower costs. These included a 15% drop in international school fees, a 20% reduction in medical tourism expenses, and a 25% decrease in airfare prices for both domestic and international travel.
Gwadebe enthusiastically remarked that the success story is ongoing, with the naira trading at 1,255/$ on Saturday, exceeding the 1,269.77/$ selling rate advised by BDCs.
Describing the ongoing market developments as a revolution, Gwadebe expressed his belief that a stable naira would attract greater foreign portfolio inflows into the Nigerian economy.
He strongly commended the CBN Governor, Dr. Olayemi Cardoso, for recognizing the critical role of BDCs in achieving stable exchange rates. Gwadebe also highlighted that the practice of Nigerians residing in Dubai bringing dollars home for sale at inflated rates has ceased due to the naira’s rapid appreciation against the US dollar.
Looking ahead, Gwadebe expressed optimism regarding forex earnings prospects, citing rising foreign portfolio investments and over $1.5 billion in inflows recorded just days after the Monetary Policy Committee’s two percent interest rate hike.
“In our view,” Gwadebe declared, “the collaboration between BDCs, the CBN, the National Security Adviser, the Economic and Financial Crimes Commission, and the Presidency’s support were instrumental in creating the opportunity to establish the foundation for this achievement. Overall, this combination of actions has fostered an atmosphere of public calmness, confidence, hope, and market liquidity.”
Gwadebe concluded by urging the CBN to continue refining the existing relationship between BDCs and the apex bank to ensure the sustainability of this success story.
