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Exchange rates convergence emerging as forex seekers flee BDCs for black market

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Preliminary indications are beginning to show that the dream of the Central bank of Nigeria (CBN) in hitting a single rate both for Bureau d’ Change (BDC) and black market operators.

Since this week, foreign exchange users are experiencing the convergence of naira/dollar rates at the official and black market rates for the first time in two years.

Business Hilights recalls that the gap between official and black market rates started to shrink since February 20, when the CBN resumed dollar interventions in key segments of the economy. The feat was achieved after the Central Bank of Nigeria (CBN) pumped over $5 billion in the last four months into the interbank, BDCs, wholesale spot and forwards auction segments of the market.

Industry pundits believed that the introduction of a new foreign exchange window for investors and exporters targeted at increasing forex supply in the market and allowing the timely settlement of transactions helped achieve the current exchange rate.

The exchange rate at both parallel market and BDCs closed yesterday at N363/$1. The attractive rate at the parallel market immediately triggered a massive influx of demands from forex users running away from the mandatory regulatory documentations sought by BDCs.

In an interview with the president of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, he confirmed the rates, explaining that BDCs were at a disadvantage, as forex users shunned them for the parallel market where they could buy without documentation.

According to him, “Many forex users prefer to buy at the parallel market instead of BDCs because there are no longer rate gaps. They prefer the parallel market where there is no single documentation required. That is why we are calling on the CBN to review the rate band for BDCs”.

He was however quick to submit that the challenges faced by BDCs, if not checked, would trigger a liquidity crisis that may derail the ongoing recovery of the naira against the dollar.

He averred that “We want the CBN to review the BDC rate to ensure that currency speculators do not return to the market. Remember the BDCs buy dollar at N360/$1 from the CBN,” stressing that his group was instrumental to the CBN’s ability to checkmate the activities of black market operators.