Why naira is firming against dollar at FX market: ABCON

The Association of Bureau De Change Operators of Nigeria has said double-edged sword dollar liquidity injection and the mopping up of the naira through interest rate hikes strengthened it against the dollar.

This is the position of the association‘s President, Aminu Gwadabe, who spoke via a statement on Sunday in Lagos.

 “The development stems from the ‘double-edged sword dollar liquidity injection and the mopping up of the naira through interest rate hikes,” Mr Gwadabe said in the statement. 

“What is happening in the market and the continued naira rebounds is the manifestation of the Central Bank of Nigeria’s double-edged sword measures of dollar liquidity injection and naira mopping through the instrumentality of interest rate hikes. It is a good development as it is a greater risk to speculate, hoard and substitute naira for other currencies,” Mr Gwadabe stated. 

The ABCON boss, however, said that the speculators were usually interested in sustainability of the recorded feat, arguing that it was panic selling as opposed to panic buying.

Mr Gwadabe urged the management of the CBN to continue to make clarifications and implement some of the association’s recommendations in charting a way forward for naira stability at the FX market.

Among the recommendations, he said, is the inclusion of the BDCs in the foreign exchange market based on their roles in meeting the needs of the critical retail end sector.

“The BDCs are necessary in the demand measures of the apex bank, transaction monitoring mechanism and clients’ utilisation with correcting and moderating potentials,” Mr Gwadabe added. 

The financial expert said that the country was experiencing increasing reserves due to increased demand for crude oil; its major export commodity.

“This is due largely to the U.S. increasing inventories and the escalation of tension in the Middle-East,” he explained.

As we continue to observe developments, there is the need to be cautious in attacking the naira as it all appears that the CBN seems poised to sustain the gains already recorded at the market,” Mr Gwadabe noted.