Chairman of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe called for improving local production and diversifying the oil economy to keep the Nigerian economy in high Naira volatility.
Gwadabe decried that despite foreign exchange interventions by the Central Bank of Nigeria (CBN), the volatility of the naira is compounded by rising inflation, rising interest rates and slow economic growth, with implications for middle and low incomes.
Speaking in Lagos over the weekend, Gwadabe said the ongoing scenarios increased the risk of stagflation with potentially damaging consequences for the poor within the economy.
He said global growth is already expected to fall from 5.7% in 2021 to 2.9% in 2022, significantly lower than the 4.1% forecast by the International Monetary Fund (IMF) in January.
Gwadabe said naira trading at 614 naira/$1 on the parallel market, dollar bids continue to rise as inflation hit an 11-month high (17.71%) in May.
These events, the ABCON boss said, are eroding household purchasing power. “The main driver of inflation is the stubborn rise in food inflation. The average price level of the food basket increased by 1.13% to 19.50% in May against 18.37% in April. This can be reversed by increased support for agriculture and government policies that support the sector,” he said.
Gwadabe said Nigeria’s huge diaspora population and market, which attracts an average of $20 billion a year, can be tapped to deepen dollar inflows into the economy.
He said expanding dollar receipt points through more than 5,000 currency exchange operators can deepen dollar inflows and significantly increase Nigeria’s foreign exchange position.
Gwadabe said that globally, CDBs remain one of the channels through which diaspora funds enter countries.
He said that the BDCs remain at the center of economic development and have the ability to attract the capital necessary for the development of the Nigerian economy and the deepening of the foreign exchange market.
ABCON believes that the success of the BDCs will be boosted by access to multiple streams of foreign exchange revenue to deepen the market, maintain the stability of the naira and boost the operations of the BDCs.
“Making BDCs one of the channels through which more than $20 billion in annual diaspora remittances enter the economy will provide depth to the foreign exchange market and boost BDC operations. Nigerian CDB operators have also identified with the immense opportunities presented by diaspora remittances and want to play a greater role in attracting more foreign capital into the economy. This is because remittances are known to help the poorest recipients meet their basic needs, finance cash and non-cash investments, fund education, foster new businesses, repay debt and, essentially, to stimulate economic growth,” said Gwadabe.
In addition, Gwadabe said the effective implementation of the “RT200 FX program”, which stands for the apex bank’s “race to $200 billion in foreign exchange repatriation” policy announced in February, will boost foreign exchange inflows into the the economy.
He said the program is a set of policies, plans and programs for non-oil exports that will enable Nigeria to achieve its ambitious but achievable target of $200 billion in foreign exchange repatriation exclusively from exports. non-oil, over the next three to five years.
Gwadabe said the RT200 FX program is one of the strategies that can help Nigeria gain more stable and sustainable currency inflows.
He said that although the CBN has recently shown greater commitment to fighting inflation by raising the monetary policy rate (MPR) by 150 basis points to 13% per annum, the strengthening of the economy through local production will reverse the negative trends in the economy.
He explained that with the inflation rate remaining higher than interest rates, investment returns will fall and foreign capital inflows will fall, resulting in sluggish economic growth.
Gwadabe said other advanced economies, including the United States, are also fighting inflation with higher interest rates.
The US Federal Reserve maintained its monetary policy tightening stance, raising interest rates by 75 basis points to 1.75% to contain inflation. This is the third rate hike this year and the biggest since 1994.
He said rising US interest rates would reduce capital inflows to Nigeria and other developing markets, noting that the US was the third largest source of capital imports to Nigeria in the first quarter of 2022. , representing 5.22% of total capital imports.
In conclusion, Gwadabe urged the CBN to liberalize the foreign exchange market, ensure that paradigms shift from demand measures to supply measures, support SME infrastructure/joint venture financing, promote awareness to the skills of operators, to ensure more collaborations between stakeholders and to develop policies favorable to the industry for the good of the economy.