The main reason for the Naira’s recent devaluation, according to a top ABCON official, is not the activities of BDC operators but rather inadequate dollar allocations from the CBN.
A 41% decline in daily turnover, indicating tighter liquidity, emphasized market volatility as the Naira hit a fresh low of N1520.4.
The official argues that improved management may stabilize the market and criticizes the lack of attention paid to the AFEM window.
Providing insight into the continued devaluation of the Naira, a senior official of the Association of Bureau De Change Operators (ABCON) who wished to remain anonymous stated that a key reason contributing to the depreciation was a shortage of supply.
The official also strongly refuted claims in some quarters that BDC operators are to blame for the recent fluctuations in exchange rates.
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The Naira reached a new low on the official market, falling to N1520.4 on Tuesday—a first since March 20. Moreover, daily turnover in May has been notably lower than in the preceding months, signaling tightening liquidity in the foreign exchange market.
The ABCON official emphasized that the central role in the depreciation lies not with the BDC operators but with the diminished dollar allocations from the Central Bank of Nigeria (CBN).
“The CBN last provided dollars to only about 30% of licensed operators,” he explained, highlighting the challenges this poses for the rest.
With insufficient allocation from the CBN, BDCs are compelled to source dollars at higher rates from the parallel market, which significantly impacts the rates they offer to customers.
Addressing the delays in allocation, the official shared, “Most of our members who bid for dollars about four weeks ago are only just receiving their allocations.”
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He further disclosed that they have received only around $40 million from the apex bank over the past three months—an amount far from sufficient to satisfy customer demand.
The official also tackled the perception that BDC operators buy dollars at lower official rates to sell them at inflated prices on the open market. He further revealed that less than a third of BDCs had received their dollar allocations from the CBN, and those who did, received them sporadically and insufficiently.
“The volume and frequency of dollar supplies from the CBN are discouragingly low. We often have to source dollars independently.”
“We haven’t received more than $30 to $40 million total in the last three months,” he lamented, describing the pace of allocations as “snail-speed.”
He criticized the government’s approach to handling the situation, stating, “We often ignore fundamental economic issues in this country and chase after less relevant matters. Such strategies inevitably lead to errors.”
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Discussing broader economic challenges, the official pointed to systemic issues beyond the forex market.
“The fundamentals, as we all know, are centered around liquidity issues. The AFEM (Autonomous Foreign Exchange Market) window isn’t being adequately utilized. Why isn’t more attention given to what’s happening there, or do they think BDCs operate in isolation from the rest of the economy?” he questioned.
When queried about the high selling rates, the official responded, “Imagine receiving just $10,000 over four weeks. It’s impossible for that amount to remain intact for so long given the demand. Clearly, we must source additional dollars to meet ongoing needs.” He emphasized that the market dynamics are driven by supply constraints and broader economic indicators, not just BDC activities.
He further highlighted the impact of inflation on currency value. “Last year’s N10,000 is barely worth N3,000 to N4,000 today. Due to this uncertainty, many Nigerians are holding onto their dollars as a hedge against inflation.”
This comprehensive account from a senior ABCON official sheds light on the complex dynamics influencing the Naira’s depreciation, pointing to systemic liquidity challenges and policy timing issues rather than malpractices by currency exchange operators.
