INTERVIEW: Forex Crisis: Naira Is Under Attack Because It Lacks Fundamentals–Gwadabe, ABCON President

The Central Bank of Nigeria in its drive to improve the efficiency of the Nigerian foreign exchange market released a circular dated August 17 where it unveiled a new operational mechanism for Bureau de Change operators in Nigeria. In this interview with THE WHISTLER, Aminu Gwadabe, the National President of the Association of Bureau de Change Operators of Nigeria (ABCON), spoke on the impact of the new guideline on BDCs, the challenges of the policy, and how the policy will deepen liquidity in the market. EXCERPTS…

What does the new circular released by the CBN mean for the BDC segment of the foreign exchange market?

What it means for us is number one, streamlining the BDC operations in terms of the recognition of the BDCs and the compliance by the BDCs. You know the CBN set out to reform the market such that it will no more be business as usual. So, what it means for us as BDC operators is compliance with what is contained in the circular. You know we have issues of revoking licences and not revoking, and up till now, people cannot get a hold of what is the truth. Most importantly, they have given an anchor rate, which is a guide for the industry explaining how a BDC should act whether you are buying CBN money or not.

The circular has gone further to say, render your returns because the statutory and regulatory requirements of a BDC demand that you must have record keeping, monitoring transactions system, a compliance officer, etc. So, they are now telling us that we must meet these criteria. They are coming up with their list, no doubt about it. Also, out of our engagement with them, they allowed us for the moment-about 95 percent of us are not even doing transactions. If those that are not transacting should send a report to you, they will send ‘nil’ because they are not doing transactions. So, they have considered that in the circular. They said even those who are not doing transactions must send a report as part of their house cleaning exercise.

How does this reform affect ABCON members and how can CBN empower BDCs to adopt technology which will result in a more transparent market?

How it affects us is first, how do we even improve and comply with their criteria so that there will be sanity? It is all about sanity and the right people. They want to democratise the process, and we are on our own. There are so many opportunities, we have our prayers to them which is they should not allow us to be only cash-based BDCs. The BDCs in other climes are doing outward, and inward money transfer transactions. Cash is getting less prominence. Licenced online outlets in other climes are even the ones carrying out the bulk of the transaction, and that is why the acting governor (Folashodun Adebisi Shonubi) is complaining he doesn’t see the inflow. How can you see inflows when all transactions have not moved digitally? They are still looking at the manual system of reporting. It is not possible to see many inflows when you rely on cash-based transactions.

They should empower the local BDCs, and enable them to have such a system and technology. It is a simple thing. ABCON has put cloud IT for over 2000 members. It is just to revamp it to look into what they are adding now in terms of their specific returns. We understand all the returns they mentioned but there is the problem of an enabling ecosystem. They must involve stakeholders and Bureau de Change. Let us together look at the template and see how we can do it and enhance it.

Is technology a major challenge to BDC operators’ adoption of the policy?

The challenge the BDCs have with the circular is mostly technology challenges. I mean the technology the CBN is trying to introduce. ABCON has its technology. We are using Amazon Web Service (AWS). Ab-initio, operators had to queue up to file returns, that is what they were doing (manual filing). So, we have transformed it for them by digitising those transactions. There are so many technology issues. Network issues, configuration issues, and engineering issues on both ends. So, let’s resolve the technical issues of that requirement and move forward.

Does the circular mean that CBN will sell dollars to BDCs?

What the circular is saying is that they have realised that some of us, our shops are still open, any transaction you do, you have an anchor rate to do it based on that rate. They are streamlining in a way to reduce the number of those who are complying or not complying. If, for example, I want to comply with the CBN guideline, then I have to look at what rate will I buy and what rate will I sell. They are coming up with an anchor rate for BDCs transactions. Some BDCs are trading, and most paramount, BDCs have the flexibility to file. But there are technical challenges that should be resolved.

Do you think the policy will go a long way to stabilise the naira in the parallel market?

Definitely, it will. You see naira has been under attack for lack of fundamentals. There are genuine demands in the market; backlogs, which have official documentation; PTA and BTA, which have official documentation. So, with this new mechanism they introduced, they can use BDCs to leverage and create avenues to fund those transactions. What is the requirement? It is just identification because of the Anti-money Laundering and Counter-terrorism Financing (AMLCFTA) requirements which Nigeria cannot be left out.

So, if the BDCs can embrace that, I’m sure the CBN will be flexible for BDCs to access windows like autonomous windows. Many governors have stopped BDCs from intervention. You can’t come up with policies or a framework without having alternatives, and research has proven that any policy you are doing without carrying the major stakeholders along will have a very technical deficiency. So, carry the stakeholders along, let them lay down their challenges, and see how they can be addressed.

The BDCs are very potent because they serve the retail end of the sector. So, the circular will have a positive impact if all these challenges are addressed. They are addressing some of them, and they are giving us rates to sell, but the technical challenges, ease of documentation, and making sure that the technology is user-friendly are being discussed. When changes are made, there is a need for sensitization and timing, because most of the BDCs are low-skilled and not so informed.

So, you need to understand their backgrounds. But it is a good one. At least they have recognized us unlike before. They are trying to bring everybody along.

Are your members ready to comply with the new policy?

We don’t have any option, it is a digital world, and the BDCs are ready to comply we have put a lot of applications and platforms to help our BDCs navigate technically, electronically and what have you. It is not even the initiative of the CBN, it was the initiative of ABCON for members to file their returns digitally instead of going to queue so that even in your bed, you can file. We embraced the technology already, but some challenges need to be integrated. For instance, we are supposed to request for passport, visa, and ticket number before selling FX, but we still need other platforms that we can go to and verify the information submitted to us. So, we are asking for now as a quick fix, instead of that rigorous validation of visa, passport, etc, why not use BVN or any means of identification? The objective is to deepen liquidity, and if you want to deepen liquidity and introduce over-regulation, then many people will not understand. Now, we are talking about complex documentation and what have you. So, this will make it difficult for our operations.

What is your advice for your members?

What I will advise my members is for now, yes, there are technical challenges that we are engaging with the CBN to resolve. Honestly, the CBN is listening, our members should comply with the new policy so that by the time the list (of BDCs) will come out, their names will be there. The new list of BDCs will be out, and they must be compliant with the new rules.