The Association of Bureaux De Change Operators of Nigeria (ABCON) said the widening gap between the official and parallel market exchange rates, is driven by acute dollar scarcity due to the continued suspension of foreign exchange sales to BDCs by the Central Bank of Nigeria(CBN).
ABCON in its Quarterly Economy Review for the first quarter of the year (Q1’22), expressed concerns over the inability of the fiscal and monetary authorities to address the wide parallel market and multiple exchange rates in the country.
The gap between the official and parallel market exchange rates, it said, widened to N171.83 to the dollar at the end of the first quarter from N106.33 per dollar on July 28, 2021, a day before the apex bank suspended dollar sales to BDCs.
ABCON said: “A premium is the outcome of market restrictions that drive the non-official supply and demand for foreign currency which is a symptom of the inconsistency of fiscal and monetary policies. It also shows lack of credibility of exchange rate policy given the level of foreign reserves.
“That fiscal and monetary policies in Nigeria cannot curtail the premium (that is banks and other intermediaries), is worrisome and highly contributory to the distortions in the economy.
“Multiple exchange rates cause distortions by manipulating relative prices in the economy and widen opportunities for rent-seeking behaviour for those who have access to the lower exchange rates. When the multiple exchange rates are corrected, it would promote a more efficient application of market-driven relative prices to allocate resources in the economy,” ABCON said.
The association also highlighted the nation’s huge public debt and increasing level of poverty, saying the Federal government should reconsider its strategy of depending on debt to grow the economy.
“The Nigerian economy is faced with two major interrelated problems: heavy indebtedness and the incidence of poverty,” saying “these have important implications for growth possibilities.”
The association said it was high time the authority reconsidered her current strategies of total dependence on debt for the survival of the economy, otherwise it may run the country to a comatose coupled with the high and uncontrollable incidence of insecurity in the nation.
ABCON said the inability to address the problem of increasing poverty will necessarily fuel crime and insecurity.
The association recommended the need for understanding on the problem by stakeholders, and agreement on a set of coherent policy responses from a wider development perspective, to complement current approaches.
It called for a medium-to- long term economic structural plans to redirect the economy from a totally import dependent one to a foreign exchange earning one, as well as from a crude oil based economy.
ABCON called for rapid employment generating policies for the youth through the introduction of modern agricultural development processes.