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Business News of Wednesday, 13 January 2021

Source: www.mynigeria.com

ABCON justifies unification of exchange rates

Unification of exchange rates is essential in other to maximise the economic benefits of increased remittances inflow into the economy, the Association of Bureaux De Change Operations of Nigeria has said.

Recently, the Central Bank of Nigeria introduced some policy measures needed to improve inflow of payments which would allow beneficiaries to collect proceeds in foreign currency.

Applauding the move by the Central Bank of Nigeria, ABCON in its quarterly review for the fourth quarter of 2020, noted that "the fundamental problem is not the payment of foreign currency to beneficiaries but a fallout of multiple exchange rates in Nigeria’s foreign exchange market.”

According to a publication on economicconfidential.com, the association stated that without the unification of the multiple exchange rates across the forex market, the increased inflow of remittances may be vulnerable to capital flight and make limited impact on the economy.

“A survey carried out by ABCON quarterly revealed that a large percentage of beneficiaries require naira for domestic commitments in Nigeria.

“Upon collection of foreign currency cash or drawing from their domiciliary accounts as the policy provided, they do the conversion usually unofficially where the exchange rates are higher.

“Though the authorities are able to capture figures of the inflows from the data of the International Money Transfer Operators for statistical purposes, utilisation of the foreign exchange may still flow into the unofficial/informal sector for capital flight and other uses not marginally expedient for the growth of the forex market.

“Thus, a major policy trust should focus on unification of exchange rates and diversification of the operational base to achieve a competitive outlook.”

ABCON, therefore, urged Bureau De Change operators to seek full automation of their operations for more transparency and participation in the remittances market.

“BDC sub-sector needs to undertake a total structural re-engineering of operations through improved technical training of operators to be able to cope with the emerging realities of the foreign exchange markets in developing economies.

“The process should encompass full automation of operations to be able to operate migrant remittance activities.

“Total review and repositioning of models of operations to reflect greater transparency, efficiency and inbuilt aggregate economic development goals should be drawn and presented to the authorities for consideration," the association said.

The association has also charged the Federal Government not to relent on the single currency project for the West African region which was necessary for economic diversification.

“We are recommending two dimensions of diversification: trade diversification which focuses on exporting new or better products, or to new market.

“And domestic production diversification which means cross-sectoral rebalancing of output, driving the reallocation of resources across industries and within industries between firms to increase total factor productivity.

“Thus, a careful consideration of the sub-regions market where Nigeria has a dominant strength should be explored. Closing the ECOWAS market is directing them to Chinese and European markets.

“The common currency for the sub-region gives Nigeria a large market hence it was upturned by the European power as the system was about to take off. Government should not give up on the project.”

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