Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), said BDCs are grappling with limited availability of forex, unfavorable offer rates, fewer participating banks, lower margins, and business uncertainties.
He noted that these factors have combined to fuel currency substitution and speculative activities, leading to the weakening of the naira.
The naira recorded a sharp decline in its value, quoting at 1,580/$ on Thursday and Friday, losing 3.5 percent or N55 compared to 1,525/$ on Wednesday in the parallel market, popularly called the black market.
At the official foreign exchange (FX) market, the naira depreciated by 43/$ on Friday as the dollar was quoted at 1,542/$ compared to 1,499/$ on Monday.
Data from FMDQ Securities Exchange Limited revealed that the naira depreciated as the dollar was quoted at N1,512.30 as against the previous close of N1,500.80 at the NFEM.
T-bill yields declining
Nigerian treasury bill yields have declined sharply, following a surge in market liquidity as well as the decline in inflation rates.
Ayodeji Ebo, an investment professional and managing director/CBO at Optimus by Afrinvest, said a decline in yield will lead to a reduction in Foreign Portfolio Investment (FPI) inflows, thereby decreasing foreign exchange (FX) inflows into the country.
“Additionally, with expectations of lower interest rates, investors are rushing to lock in current attractive rates, reducing the available liquidity for speculative activities or investments in dollar-denominated assets. This, in turn, limits demand for foreign currency and may impact exchange rate dynamics,” he said.
Responding to why the naira is falling to a new low, Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., said there are different factors but the gradual decline in yields is one of them.
Tilewa Adebajo, CEO, The CFG Advisory, said: “We are dealing with speculation and speculators.”
BDC’s concerns
Gwadabe raised concerns over several constraints affecting BDC operators, warning that these challenges are eroding confidence in the FX market framework.
To address these challenges, Gwadabe urged the CBN to fine-tune its interventions in the retail FX market through BDCs. He also called for the approval of the importation of dollar cash by licensed operators and a transparent monitoring mechanism for banks’ dollar sales to BDCs.
“The apex monetary authorities must sustain their magic wands by calibrating interventions in the retail market, granting approval for dollar cash imports to licensed operators, and putting in place a framework for transparent bank dollar sales to BDCs,” he said.
Beyond monetary measures, he called on fiscal authorities to sustain efforts in reducing the fiscal deficit, boosting productivity, enhancing forward communication and ensuring effective information flow.
Gwadabe also urged federal and state governments as well as relevant agencies to declare a state of emergency on inflation, stressing that tackling rising prices is critical for sustained economic growth and poverty alleviation.
“Above all, operators must embrace the new reforms and ensure strict compliance to support stability in the foreign exchange market,” he added.
A BDC operator, who pleaded anonymity, confirmed that he and his colleagues are not getting the dollars from the banks.
In December 2024, the apex bank granted BDCs temporary access to the NFEM between December 19, 2024, and January 30, 2025, but later extended it to May 30, 2025.
The BDCs will be allowed to trade up to $25,000 weekly, with transactions requiring upfront funding at prevailing rates and adhering to a maximum spread of 1 percent.
