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Sunday, February 25, 2024

Depreciating naira spurs shift as Nigerians stash savings in US dollars

Bureau De Change operators express concern over eroding naira value, call for increased liquidity in the forex market

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Bureau De Change operators in Nigeria are sounding the alarm as a result of the naira’s continuous depreciation, revealing that some Nigerians are opting to store their savings in US dollars. Aminu Gwadabe, the National President of the Association of Bureau De Change Operators of Nigeria, emphasized the necessity for a more liquid forex market to address the prevailing situation.

Gwadabe highlighted that the recent release of $2.2 billion by the African Import-Export Bank was insufficient to invigorate the market. He expressed concerns about the potential rapid depletion of the funds within a short period, considering the existing daily demand of $150 million to $250 million in the Investors and Exporters (I&E) window. Gwadabe cautioned that speculators could quickly exhaust the funds within 10 to 15 days.

He, however, called for a paradigm shift in the supply of dollars into the FX market, stating, “We need to have a paradigm shift in terms of supply; it’s very important and should be immediate.” Gwadabe advocated for revisiting the Central Bank of Nigeria’s 2020 circular, suggesting that Bureau De Change entities should function as agents of International Money Transfer Organizations (IMTOs), enhancing transparency in the process.

Commenting on the $2.2 billion facility, he said, “The $2.2 billion Afrexim bank crude prepayment facility is a welcome development, but I don’t think it’s enough to stimulate the market.” He urged the Central Bank to review its 2020 circular to separate the operation and ownership aspects of transactions.

A financial analyst supported the notion, highlighting the strategic acquisition of foreign exchange by Nigerians for future financial obligations. He noted, “If you look at the trend of the naira this year alone, there will be devaluation,” and explained that individuals with upcoming dollar needs were buying and holding dollars as a proactive measure. The analyst shared instances of individuals planning for vacations or funding foreign university education for their children as motivations for accumulating dollars to meet future obligations.

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