The Association of Bureaux de Change Operators of Nigeria (ABCON) has announced its support for the Central Bank of Nigeria’s directive instructing banks to cease using domiciliary accounts as collateral for naira loans.
In a statement on Thursday, ABCON President Aminu Gwadabe conveyed the association’s endorsement of the directive, highlighting its potential to enhance liquidity in the currency market and fortify the nation’s reserves.
Parallel Facts reported that CBN issued a circular mandating Nigerian banks to discontinue the practice of using foreign currency deposits as collateral for naira loans.
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The apex bank has prohibited such transactions and granted banks a three-month window to cease all related activities.
Commenting on the practice of companies using their non-oil export domiciliary accounts as collateral for naira loans, Gwadebe remarked, “We are surprised by the fact that some companies and manufacturers with substantial balances in their non-oil export Dom accounts obtain foreign exchange from the official window and use it for naira loans.
“We recommend a review of the guidelines regarding holding currencies in non-oil export accounts to a maximum of 48 hours, taking inspiration from the South African policy on non-oil export dom account operations. Additionally, the CBN should not consider applicants with significant balances in their non-oil export proceeds dom accounts eligible for foreign exchange requests at both the NAFEM and NAFEX windows.”
Gwadebe also advocated for the enhancement of CBN policies on BDC operations to be enshrined in legislation to bolster investor confidence.
“We urge the CBN to upgrade its policies and circulars to legislation regarding the impending BDCS new reforms to give comfort and guarantees to would be investors in the transformation of the BDC industry’s sub sector and allowing only the existing stakeholders the grandfather’s right for merger and acquisition to meet the expected reviewed financial requirements as suggested by ABCON,” he said.
The ABCON boss said that, as a body, ABCON and its members have resolved to continue engaging all stakeholders to deepen, liberalise the retail end of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments.
“We express our profound gratitude to the management of the CBN for its reconsideration and reinstatement of our sub sector as third leg of the market to counter hoarding and speculation with faster results than expected. The BDCs, though unfortunately perceived sometimes as crude but effective, will always remain the potent transmission mechanism tool of achieving the apex bank’s mandate of price stability and liquidity in the market.
“We therefore urge the CBN to continue to drive and expand its thought mechanism to maintain the feat so far achieved in more than 15 years; as we have not only achieved the convergence of both rates, but market calmness and confidence of the public and foreign investors.”