The Association of Bureaux Des Change Operators of Nigeria (ABCON) advised the apex of the Central Bank of Nigeria (CBN) to stop banks from paying recipients of Diaspora remittances in dollars as a strategy to save the falling Naira.
This was disclosed President of ABCON, Alhaji Aminu Gwadabe to the News Agency of Nigeria (NAN).
The CBN, in November 2020, amended the procedure for the receipt of diaspora remittances and insisted that it must be paid in dollars to the beneficiaries, in an apparent and frantic attempt to improve liquidity in the forex market and reduce the disparity between the black market and the official window.
Aminu Gwadabe, however, claimed that this action by the apex bank is counterproductive because the majority of the dollars wind up hidden under mattresses outside of the traditional banking system and have little use for facilitating capital raising or imports.
Furthermore, the data from the CBN indicates the total amount of dollars deposited into domiciliary accounts of Nigerian banks as of December 2021 is an estimated $20 billion.
What ABCON is saying.
Alhaji Aminu Gwadabe stated that the CBN should reverse its mandate to banks to pay recipients of Diaspora remittances in dollars.
He states that most of the dollars end up under pillows outside of the mainstream banking system with no utility for capital mobilization and imports.
“It fuels currency substitution, it puts pressure on the Naira exchange rate and inflation and does not have a statutory backing unlike Domiciliary accounts, therefore, it is illegal,” Gwadabe said.
The ABCON boss said that Nigeria had a long history of stifling the tradable sector (oil excluded), first through the Commodity Boards, the Arbitrage Kingpins, the bastion of corruption that straddled the export ecosphere whom Babangida dismembered in 1986.
He said, “They bought low at the farm gates and sold high at the international export markets, much of the difference ended up in their private pockets. They impoverished the cocoa, groundnut, palm oil producers, etc. and eventually drove them out of business, not oil.”
He added “Today, they have reincarnated as plethora of gatekeepers including the Nigerian Export Supervision Scheme at the ports exacting tolls from exporters.Poor infrastructure, power supply and generally unskilled labor further compound the weakness of our tradable sector.”
At the start of July 2022, the exchange at the parallel market was trading at N605/$. Compared to the current value of N720/$, the Naira has declined by a whopping 19% in one month.
“Any wonder why Ghana’s annual non-oil export is 13.1 billion dollars, while Nigeria’s is 1.3 billion dollars, We have a long way to go,” Gwadabe said.
He stated that all indicators point to the Naira having a greater potential for decline than for appreciation since the current monetary and fiscal authorities will continue to maintain a docile stance.