The Association of Bureaux de Change Operators of Nigeria (ABCON) has voiced its support for the recent directive issued by the Central Bank of Nigeria (CBN) instructing banks to cease utilizing domiciliary accounts as collateral for naira loans.
Aminu Gwadabe, the President of ABCON, articulated the association’s endorsement of this directive, emphasizing its potential to enhance liquidity in the currency market and fortify the nation’s financial reserves.
The CBN’s directive, outlined in a circular titled ‘The use of foreign-currency-denominated collaterals for naira loans,’ mandates Nigerian banks to discontinue the practice of accepting foreign currency deposits as collateral for loans denominated in naira.
Banks have been given a three-month timeline to terminate all such transactions, as stipulated in the circular bearing reference number BSD/DIR/PUB/LAB/017/004, as reported by The PUNCH.
Gwadabe shed light on the ramifications of allowing companies to leverage their non-oil export domiciliary accounts as collateral for naira loans.
Expressing bewilderment, he highlighted instances where firms with substantial balances in their non-oil export domiciliary accounts sourced foreign exchange from the official window and utilized it for naira loans.
In response, he advocated for a review of guidelines concerning the retention of currencies in non-oil export accounts and proposed aligning them with policies observed in South Africa.
Additionally, Gwadabe urged the CBN to refrain from granting foreign exchange requests to applicants with significant balances in non-oil export proceeds domiciliary accounts.
Furthermore, Gwadabe called for the enhancement of CBN policies governing BDC operations through legislative measures to bolster investor confidence.
He emphasized the importance of upgrading existing policies and circulars into legislation, particularly in anticipation of forthcoming reforms in the BDC industry.
Gwadabe advocated for the preservation of existing stakeholders’ rights and proposed measures to meet revised financial requirements.
In a concerted effort to deepen and liberalize the retail segment of the market, ABCON and its members have committed to engaging with stakeholders.
Their objectives include facilitating price discovery, enhancing market efficiency, promoting transparency, bolstering financial reserves, and fostering a healthy balance of payments.
Gwadabe expressed gratitude to the CBN for reinstating the BDC subsector as a crucial component of the market, acknowledging its role in combating hoarding and speculation.
Looking ahead, Gwadabe urged the CBN to sustain its efforts in maintaining market stability and confidence.
He commended the apex bank for its achievements over the past fifteen years, particularly in achieving convergence between exchange rates and instilling calmness and confidence in both domestic and foreign investors.
Recently, the CBN sold $10,000 to eligible BDCs at a rate of N1101 per US dollar, with a caveat prohibiting them from selling at a spread exceeding 1.5 percent above the purchase price.
This move underscores the CBN’s commitment to regulating the foreign exchange market and ensuring price stability and liquidity.
