ABCON President calls for new system of forex market operations

Nigeria needs a new system of foreign exchange market operations which include total floating of the naira, says Dr. Emmanuel Balogun, President, Association of Bureaux De Change Operators of Nigeria (ABCON).

There have been seemingly structural defects of the Nigerian Foreign Exchange market since the structural adjustment programme of 1986; this is not to say that the structure before 1986 was ideal.

The lopsided, discriminatory structure under the multiple foreign exchange market has given rise to an exchange rate regime that defy every manipulation of the monetary policy and prudentially this calls for a “NEW SYSTEM IN THE NIGERIAN FOREIGN EXCHANGE MARKET OPERATIONS”, said in Abuja. He spoke as guest speaker at the EFCC Training and Research Institute (TRI), Karu.

In a paper titled,  “Operations and Role of BDCs in the Formal and Informal Financial Sectors of the Nigeria Economy”.  Balogun said, “The change in 1986 was radical because it marked the swift change from fixed exchange rate system to floating, this we however know is usually subject to manipulated in other to suit specific political objectives.

Thus, the economy has not derived much benefit of floating exchange rate system as it is the case of other economies operating a floating system. The new system should look at the need for a total float of the currency along with regional and international convertibility of the Naira.

This will be complimented by total and unbiased structural adjustment of the market players. There is the need for a total emancipation of the Other Financial Institutions in the Nigerian financial system to give a level playing ground for all operators.

“The operating guidelines for registration and licensing of BDCs should be reviewed in such a way as to allow as many unlicensed operators as possible into the market by way of further formalizing the informal sector which has been of continuous concern to all. This will make for proper identification of the operators and business locations and also enhance regulation and data generation for policy formulation.

“The CBN should ensure that all those who have interest in the business of buying and selling FOREX are properly registered with CAC with issuance of permits or certificates to carry out such businesses in Nigeria.

“CBN should further liberalize and graduate the issuance of permits  and certificates so that the remnant of informal market operators would have opportunity for registration. This segmentation is important in order to bring further transformation in the informal market, assist in returns rendition and data generation.

“The academic requirement to manage this class of BDC should be minimized to simply, the ability to read and write considering the fact that some of the present operators are not very knowledgeable.  However, the manager or compliance officers who would interface with the supervisory and regulatory authorities must attain some reasonable standard of education.

“Having considered and examine the concept of Bureaux De Change, their operations and functions in the economy and their role in the foreign exchange market, it is obvious that the foreign exchange market is incomplete without the BDCs. Any attempt to reform or strengthen the foreign exchange market to the exclusion of the BDCs would create distortions and opportunities for rent seeking and black market activities.

The existence of the BDC sub sector, vibrant for that matter is imperative to the effective functioning of the foreign exchange market vis-à-vis attainment of realistic and stable exchange rate. The alternative to the vibrant existence of the BDCs sub sector will be a dominant, black and strong illegal market for foreign exchange.

“ABCON has a role to play in closer supervision of his members toward preventing the subsector from exposure to money launders. This will be achieved through invoking all the provisions of the existing constitutions and operating guide lines that require full disclosure of operations by members to the ABCON secretariat. The Central Bank of Nigeria has been very wonderful in the approval of  the Self Regulatory Organization (SRO) status of ABCON and standing by them to achieve the status. ABCON must collaborate with E.F.C.C to combat financial crimes.
“Bureaux De Change are currently passing through structurally difficult era in their history.

They need to be encouraged and structured to achieve more desirable economic growth than being strangulated out of business.

“There is the need to expand the scope of the operations of BDCs for the benefit of the economy and for increased profitability to justify our investment in the subsector. The merging of the two classes (Class A and B) will provide good vehicle for the achievement of these objectives.”