A senior official of the Association of Bureau De Change Operators (ABCON), who chose to remain anonymous, provided insight into the ongoing depreciation of the Naira, stating that a lack of supply was a major factor causing the depreciation.
The official also strongly refuted claims in some quarters that BDC operators are to blame for the recent fluctuations in exchange rates.
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).
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.”
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.
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.
This steep downturn reflects broader issues within the Nigerian economy, particularly in terms of forex liquidity. Over the last week alone, the Naira has lost about 11% of its value on the official market, underscoring the substantial hurdles that Nigeria faces in stabilizing its currency.
Trading dynamics on that day revealed the erratic nature of the forex market, with the Naira hitting an intra-day high of N1,568/$1 before dipping to a low of N1,350/$1. Such fluctuations suggest a volatile session, where initial sell-offs were perhaps countered by subsequent buy-backs or corrective movements.
Further complicating the forex scenario is the sharp 41% drop in daily turnover on the same day, with market activity plummeting to $128.76 million from $217.64 million recorded the previous day.
This dramatic fall highlights the unpredictable nature of dollar supply, which had surged by a significant 91% just the day before, emphasizing the capricious supply dynamics in the official market.
Despite these turbulent conditions, Nigeria’s foreign exchange reserves have shown some resilience, having increased by $262 million since April 19, 2024.
This improvement began around the time the Governor of the Central Bank of Nigeria, Yemi Cardoso, stated that the apex bank would not actively defend the Naira despite a prolonged dip in the country’s reserves. This strategic reserve accumulation could provide some support for the Naira if managed effectively.