The Association of Bureau De Change Operators of Nigeria (ABCON) has raised concerns over the naira’s increasing volatility, warning that the local currency is now one of the most unpredictable in the world due to multiple economic and regulatory challenges.
ABCON President Aminu Gwadebe, in an exclusive interview with Nairametrics, lamented the inconsistent trajectory of the naira, attributing its instability to factors such as:
- Trade wars
- Exchange rate fluctuations
- Speculative attacks on the currency
“The forex market is facing serious challenges, with liquidity shortages and excessive volatility. The naira, unfortunately, is suffering an inconsistent journey, bedeviled by all kinds of wars—trade war, rate war, and speculative attack—making it the most unpredictable currency in the world,” Gwadebe stated.
Factors affecting the forex market
Gwadebe outlined key challenges affecting Nigeria’s foreign exchange market, including:
- Global economic uncertainty: Slowdowns in major economies like the US, Europe, and China have disrupted trade volumes and worsened market volatility.
- Regulatory changes: Policies such as the recapitalization of BDCs have increased compliance costs for forex brokers and impacted liquidity.
- Technological shifts: The adoption of automated trading systems and AI-driven forex strategies has improved efficiency but also introduced new risks like flash crashes.
- Market volatility: Rising geopolitical tensions and U.S. tariffs have caused an exodus of foreign investors, further weakening the naira.
Addressing forex volatility
To stabilize the forex market, ABCON proposed several measures, including:
- Unifying exchange rates: The CBN’s “willing buyer, willing seller” approach should be strengthened to reduce disparities.
- Enhancing transparency: The CBN must provide real-time market data to curb speculation and manipulation.
- Boosting liquidity: Increasing banks’ liquidity ratio to 40% and allowing BDCs to operate as direct agents of International Money Transfer Operators (IMTOs) could improve forex supply.
- Strengthening external reserves: Encouraging foreign investment, export growth, and asset sales will help support the naira.
Gwadebe also noted that banks have imposed restrictions on international transactions due to forex shortages, limiting foreign currency withdrawals and transfers abroad.
As the naira continues to experience turbulence, ABCON urges market participants to stay informed, engage with stakeholders, and adopt effective risk management strategies to navigate the crisis.
