In Pursuit of FX Speculators

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Obinna Chima highlights the outcome of a recent meeting which for the first time in several months saw officials of the Central Bank of Nigeria, Department of State Service, the Police, and over 3,000 directors of Bureaux de Change operators under one roof to discuss ways to ensure that the stability in the foreign exchange market is sustained

Over 3,000 Bureaux de Change (BDC) directors held emergency meeting in Lagos, on how to rescue the naira. The meeting, with theme: ‘Role of BDCs in Price Stability- Realities and Compliance’ was organised by the Association of Bureaux De Change Operators of Nigeria (ABCON) and attended by representatives of the Central Bank of Nigeria (CBN), Department of State Service (DSS) and the Police. The directors were advised on the need to follow sound corporate governance practices and take direct charge of their businesses as they will be liable for any breach of CBN’s operating guidelines.

The participants condemned the role of foreign exchange (forex) speculators in naira crisis and agreed to tackle the menace headlong to save the local currency from further depreciation.
The ABCON President, Alhaji Aminu Gwadabe, in his opening remarks, said CBN was determined to raise liquidity in the forex market provided the BDCs operate within set guidelines.

He said: “The CBN has assured us that it will continue to inject more liquidity in the forex market, but BDC operators must shun speculations and other malpractices. We are expected to comply with the Know Your Customer –KYC directive of the CBN. Stiff sanctions await any operator that breaches the CBN’s set rules.”

Recent investigation by THISDAY showed that unrelenting currency speculators and traffickers have continued to evolve strategies to ensure that they frustrate the CBN’s objective of achieving exchange rate stability and covergence in the economy.

THISDAY investigation showed that a lot of currency speculators that got their fingers burnt as a result of the new foreign exchange (FX) policy and the sustained dollar injection by the central bank since February are still resistant as they have continued to devise strategies to manipulate the market. A currency trader who pleaded to remain anonymous, alleged that some currency speculators now connive with bank officials to generate fake air travel tickets, just to enable them access personal travel allowance (PTA). These funds are thereafter sold on the parallel market.

Also, THISDAY findings showed that another factor responsible for the flunctuation of rate on the parallel market in the past few days was that lot of illicit funds in the economy were being used to bet on the forex market.

In addition, THISDAY also learnt that due to the anticipation of a devaluation of the naira exchange rate in the short-term, a lot of banks have been devising strategies to hold back their dollar cash.
Furthermore, it was learnt that the sale of tickets at discounted dollar rate by some airlines also contributed to the surge in dollar demand observed in the market recently as passengers had to resort to the blacblanket to buy dollars.

Gwadabe, who confirmed that the activities of speculators and currency traffickers was having a negative effect on the market.
“We believe that there are lots of illegal money in any economy being used to distort the market. When you have such funds that cannot pass through the banking system, if they tell you that the naira exchange rate is N500/$1, you can buy, just for you to frustrate the system.

“Most of the funds that cannot be kept in the banks have found their way in the parallel market. Also, I agree that the speculators are still strategising because they have lost money and so they can’t just go away like that.
“Sometimes they (currency speculators) come up with propaganda such as: the CBN is not selling dollars to BDCs, CBN cannot sustain this policy, etc, and such information affects rate,” the ABCON boss said.

Similarly, an analyst at Ecobank Nigeria, Kunle Ezun, who agreed that the activities of currency speculators was responsible for the volatility on the parallel market, advised the central bank to “take its mind off the parallel market.”
“It is a market they can’t control. It is an informal market. There is no way the CBN can control the naira exchange rate on the parallel market because they (CBN) don’t even know the depth of that market,” he said.