AMINU GWADABE: No Country will Allow Its Currency to be Determined by Demand and Supply

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Aminu Gwadabe

In the wake of Nigeria’s ailing economy, the calls for currency devaluation, allegations against the bureau de change segment of the foreign exchange market for fanning the ember of volatility in the market, President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, speaks with Adedayo Adejobi on misconceptions, contributions of BDCs to Nigeria’s economic growth

Prior to 2019 elections, you set a N250/$1 exchange rate agenda for President Muhammadu Buhari. Five months down the line, nothing has changed. Was this a bid to score political points?

The target setting is achievable and this was in form of a suggestion. We have achieved stability in the last 27 months, and based on that, we felt the need to see the naira appreciate instead of instability. We want to see the naira appreciate when the factors are favourable. Liquidity is there. Just recently we have been seeing lots of opportunities. The tension in the gulf, war between America and China, the instrument of the European Union in trying to circumvent the American banking system because of the policies and sanctions the American government are coming up with- all these will improve our buffers. The next thing to do is to move from stability to currency appreciation.

There are industries to be developed. We’ve been too dependent on oil. The raw materials, machineries and equipments are still imported. We believe that if there is a shift in exchange rate, the economy would be buoyant; a lot of things would become much easier.

Another area we believe could be harnessed is giving our services in the area of Diaspora remittances. We have over $40 billion coming into Nigeria, four times the size of oil receipts, which is not more than $11billion annually. But what we receive officially is not up to 10per cent. We only account for $4billion instead of $40bn and out of this $40billion that comes into the country annually, it’s only one million Nigerians in Diaspora that has been harnessed. And we have about 15-20 million Nigerians in Diaspora. In a way, there should be a policy to cater for Diasporans.

I heard the Diaspora commission is channelling a policy on Diaspora remittances. It’s a good development and we are already partnering with them, because we remain the most effective monitoring tool in terms of foreign exchange management of the Central Bank of Nigeria. Considering our membership with over 5,000 members and retail end business, we have helped the regulator and government ensure there is calmness. We have also ensured liquidity in the system.

In India, the Bureau De Change trades over $30billon annually. In Diaspora remittances. In Lebanon, the Bureau De Change operators are the wheel of that economy. Same with United Arab Emirates, the cash need of the banking system is provided by the Bureau De Change as a result of their involvement in Diaspora remittances. So, why can’t we do same in Nigeria? We’ve always concentrated our energy and demand on price, we haven’t looked at how to widen our supply. The Diaspora remittance is cheaper, stable and available. On our part as an association, we are on a vigorous automation of our members, whereby they will averagely meet the requirements of the transactions. It borders down on know- your –customers (KYC), appearance and automation of our internal operations. I believe private sector- driven entrepreneurs will help the government achieve it. The political will need to be there, whilst the bureau de change needs to be empowered. We have been pushing the demand for the Agency of International money transfer operators and we are still working to realise the dream. I can assure you that would be the destination.

Analysts have questioned the business model for the Bureau De Change. Is it okay for you? Why are you not collecting moneys from visitors, Western Union and tourists? Why is the Nigerian Bureau De Change model different?

We, as operators are tired because it’s a limited model. It’s not empowering us at all. But there must always be a beginning and each country has its peculiarity. The defence of each country’s currency is an act of the Central Bank and one of its major mandates is to defend the strength and value of the currency. We are thinking and proactive. If the BDC operators were given the mandate to trade over $40billion Diaspora remittance in the country, what would the rate of dollar, compared to the present regimented model.

What are the solutions?

Open the window for BDC agency to participate in Diaspora remittances. Give them the agency. The inflows are there. It’s stable, transparent and can be captured as official proceeds. It can grow other sectors, boost employment and healthcare, and contribute to the Gross Domestic Product of the country.

The regulator should support the automation of our association so that we can build capacity; enhance appearance, and global best practice. We are not like conventional banks, we operate round the clock. Our services are unique and we are not competing. We are only complementing our services with the banking industry. There is the need to continue stakeholder engagement. The Central Bank of Nigeria interacts with us and they have advised us to build capacity. And we are building capacity to best international standards.

Now, majority of our members render their reports from the comfort of their offices using could technology. We are transforming our internal protocol and process electronically. Automation is what we are doing to enhance capacity, appearance and global best practice.

The dollar- naira exchange rate used to be 1-1. For me, it is a shame. I’ve been going to Saudi Arabia since 1991, Dhiram and Dollar has been between 3.5 and 3.5. till date, it hasn’t changed, well over 30 years. Sometimes it’s not the rate that matters, its stability. We are blessed in Nigeria. A lot of windows of opportunity, We are however working with the Central Bank of Nigeria and the Diaspora commission to see how we can achieve this quantum leap. We all have to work to see that we are there, and we are preparing our members for doors and the challenges ahead.

Analysts have accused BDCs as part of those causing volatility of the foreign exchange. What’s your take on this ?

It’s unfortunate, anytime there is a crisis, we become the easy target and people say we are the cause. There is a misconception. It’s a misnomer. It’s not true, it’s not correct. There are different foreign exchange operators in the system. The unparalleled, unregistered markets are part of it. Sometimes, journalists don’t seem to get the difference between the licensed and unlicensed operators. It gives us concern. We need to make this distinctions always so that we can appreciate the role registered operators are playing in this economy. We remain the most potent exchange rate management tool of the Central Bank of Nigeria.

In the 80s, there was structural adjustment programme, import licensing and Dutch auction system. Because of the role the Bureau De Change has played, we have started hearing of windows of supplies opening- Financial Markets Dealers Quotations (FMDQ). We proposed the basis of Financial Markets Dealers Quotations, and today it’s one of the biggest windows that the Central Bank of Nigeria is using to neutralise any volatility in the market. If we had been identified as people that are giving support, I think this notion of saying we are the cause of volatility would not be there. I’m happy regulators and security agencies are beginning to see us as a contributory party.

How have you contributed to the growth of Nigeria’s economy?

We have contributed in the areas on rate conversions. The difference we usually had with inter-bank and the parallel market is no more there. Volatility has been removed completely. We’ve also contributed to stability and liquidity. People now don’t buy and keep dollars again because of fear that the rate would crash or go up. And so, we have given comfort to parents who pay school fees abroad, to manufacturers who need to plan their stocks, whilst we’ve also contributed to the employment chain with over 5,000 registered members. Each bureau de change has a minimum of four directors and three staff. The multiplier effect of that number of the economy can’t be over-emphasised. We are also formalising the informal sector in terms of statistics. The central bank can now follow their dollars unlike before when they didn’t have track records. We render returns of what people buy to the Central Bank of Nigeria. We are proud of our contributions and we’ll continue to do more.

What’s BDCs’ relationship with banks?

The banks are our partners. We cannot do transactions without a clearing house and the banks are our clearing houses. They are our warehouse and custodian. We are not competitors, we are only complementing. We give a turnover of over $300million monthly to the banks in terms of commissions and charges through our transactions.

What we are saying is limit the banks to wholesale foreign exchange transactions and give the bureau de change retail transactions. That is what is done in other climes. The banks should not be engaged in selling $500-$1,000 to travellers. It should be within the purview of Bureau de Change operators.

Some analysts have advised on the devaluation of the naira, saying, the process of devaluation would discourage import and boost economic growth. Do you agree with this recommendation?

There are stages. You cannot control what you don’t own. The currency of import is the dollar which we don’t have. We need to earn more dollars to continue our import. Till date, our industries are in comatose stage, not functioning. We don’t have electricity. We are just improving our food production, and these are primary products. They are not even processed because there is no value chain. We are an import-dependent economy. China can easily devalue its currency, because 95 per cent of what they produce is going to be exported, same with Malaysia which produces animal feeds. Till date we are talking of integration, draft and framework. A case in point is the African Continental free trade agreement (AfCFTA), we are talking of draft of an effective integration model. The infrastructures, transport and electricity are not there. Even our petrol is refined abroad. Anytime the price of crude oil goes up, it puts the government in crisis because the refineries are not working. The integration is not there. America, Europe is now at the last level-currency level. Except if you want to grind the economy to a halt, you may then devalue. If not, lets improve our productive capacity we can then begin to have some exclusiveness.

The 42 items have helped in ensuring stability in the system, it’s a good step. So we should continue on such policy trajectory that would enhance productivity in the system. Then we can say we want to devalue our currency. No country will allow its currency to be determined by demand and supply forces. America is strong today not because of weapons, but because of the power of the dollar. That is why other advanced countries want to bring down the power of the dollar, thus neutralising America’s power.

How do you see the AfCFTA panning out, and how it would affect intra-Africa trade?

The percentage of trade within the African region is very minute compared to what we are doing with other continental blocs. It’s a good framework and the first effective integration model with the African economies. There are a lot of talks on it, but without an accompanying political will by various governments because of so many fears.

There are a lot of concerns more especially on what will come into the country being a dumping ground. Africa is blessed, we have everything. We have to look at our comparative advantage and the raw materials can we produce to give to other countries. Africa cannot fold its arms, we must encourage integration. There is total lack of effective linkages within and amongst the African countries. Now that they have identified the need for this integration, I think it’s a welcome development. It would integrate factories, development, transportation, industries and electricity. Nigeria has the market and population and we stand to get a lot.

On the advantage for the foreign exchange market, we will develop currency warehouse that would make Nigeria sovereign. Lots of West African countries are dependent on Nigeria’s economy. It would make naira sovereign in West African economies and improve volume of business. Integration would make it transparent. I want to advise that they do not just leave it at the signing level. Concerted efforts should be mobilised to ensure we have achieved all these three levels of the integration. We however need to improve and empower our compliance institutions.

What are the areas the Central Bank of Nigeria needs to improve on in order to increase Nigeria foreign earnings?

Diaspora remittances and the diversification of the economy will improve and increase Nigeria’s foreign earnings. Other sources of earnings asides the oil receipt are not stable. Nigerians are having problems in Italy with regards to sending money to Nigeria. Nigerians in Canada don’t have channels to send money to Nigeria. The opportunity is there. The Diaspora commission, Presidential committee and economic team should look at this. They should reach out to stakeholders so that we can hit the ground running to solve these problems.

As your tenure comes to a close, what legacies are you leaving behind?

I’m delighted with two achievements- the automation of our members, changing our appearance, processes and compliance. We have been building capacity of our members. In fact, we are at the final stage of registering our foreign exchange retailer’s institute whereby we’ll continue to ensure capacity building of our members. We’ve also formalised the informal bureau de change sector. We were initially 1,400 members, but now we are 5,000 members and this transcends employment generation and impact the economy positively.