The Association of Bureau De Change Operators of Nigeria (ABCON) has warned that foreign exchange speculators may resist the naira’s rapid appreciation to mitigate their financial losses. This concern arises as the naira continues to gain strength following the Central Bank of Nigeria’s (CBN) implementation of the Enhanced Foreign Exchange Market System (EFEMS).
ABCON President, Aminu Gwadebe, highlighted the issue during a recent discussion, urging the CBN to sustain its efforts against illegal forex activities such as speculation and currency substitution. Gwadebe emphasized the need for closer engagement with Bureau De Change (BDC) operators in managing forex market volatility.
Weak Demand and Oversupply
The forex market has experienced significant changes since the introduction of EFEMS, with the naira appreciating in both official and parallel markets. Gwadebe noted that the market is currently characterized by weak demand and excessive supply. He explained:
“The market is dull. Demand is very weak and supply very huge. Speculators are facing substantial losses, and I can see them resisting this appreciation to cover their losses. The CBN must maintain the momentum and discourage illegal behaviors of speculation and currency substitution” (Gwadebe, 2024).
He added that the naira’s rapid appreciation might not align entirely with the CBN’s established models, calling for vigilance and strategic intervention to ensure sustained progress.
CBN’s Liquidity and Control
Gwadebe expressed confidence in the CBN’s ability to sustain its intervention in the forex market, citing increased liquidity from various inflows. He suggested democratizing the EFEMS platform to enhance transparency and accessibility, allowing all market players to publicly post their buying and selling rates.
“The CBN has enough liquidity to control the market. However, EFEMS should enable real-time access for all players, not just the existing ones. The platform must be open and accountable to the public,” he stated.
Impact of EFEMS on Transparency
The EFEMS platform, launched on December 2, 2024, has addressed inefficiencies in the forex market by improving transparency and regulatory oversight. The system centralizes forex transactions, simplifies operations, and ensures better price discovery. According to the CBN, this innovation has played a key role in stabilizing the naira and enhancing market confidence.
Gwadebe acknowledged the initial uncertainty surrounding EFEMS but emphasized its positive impact on both business operations and the broader economy. He observed that the platform’s introduction has increased dollar supplies in the market while limiting naira-dollar substitution due to reduced naira cash availability.
“We are committed to supporting the ongoing naira appreciation as it benefits both our businesses and the economy. The transparency brought by EFEMS is a win-win for all stakeholders,” Gwadebe concluded.
Revised Forex Market Guidelines
The CBN’s revised guidelines for the Nigerian Foreign Exchange Market, effective November 29, 2024, have consolidated all FX windows into a single platform managed through EFEMS. This change aims to eliminate inefficiencies and ensure that FX transactions reflect the naira’s true market value.
The reforms also allow BDC operators to purchase foreign exchange directly from authorized dealers, enabling them to play a more active role in meeting retail FX demand. By streamlining the forex market, the CBN hopes to create a transparent and well-regulated system that balances market accessibility with effective monitoring and control.
The naira’s recent gains reflect growing confidence in the CBN’s monetary policies and its commitment to fostering stability in Nigeria’s foreign exchange market.
