REVALUATION OF NAIRA
In Nigeria’s foreign exchange (FX) market quotation system we have two quotations against the USD-dollars. The “parallel” market; Bureau De Change (BDC) - instituted bank “agents” quotation rate USD/NGR 1:308 and the fixed CBN Exchange rate of USD/NG, 1: 198. The common man would ask how the exchange rates between the two markets are determined, justified, how it impacts Nigeria’s economy and how is there a 65% disparity between the CBN and the parallel market(BDC)-(Corruption; core cause of the status of our economy). The BDC (parallel market) is instituted market platform to trade currencies with customers to make profit locally. Profits are made from a commission payment on transaction. Commission is generally charged as a percentage of the amount to be exchanged or a fixed fee or both, justified by the incurred processing cost of providing this trade service, which is usually 2-5% with other countries. In some situations there could be a spread bid because of high demand of dollars against a country’s currency or vice versa, commission here could be higher,5-10%. The BANKS are market makers of currency quotation in the parallel market (BDC). The commission is the profit for the BDCs agents, like any trader and not the nation. So it was not surprising this administration discovered lots of fraud in this sector there was a 50% increase in the numbers of BDC’s in the last four (4) years, 95% is allegedly owned by bankers (institutive economic agents). Resultant impact of this abnormal, unjustifiable and criminal quotation of Banks and BDC’s on FX of Nigeria’s economy include; - because of the organized crime in the banking sector a high percentage of dollars used for economic activity in the country is gotten from the BDCs, resulting in the lower fixed exchange rate quotation of the CBN been almost cosmetic as it does not reflect on the economics of the economy. The parallel market quotation of 65% margin becoming the dominant exchange rate stimulating economic activity. The USD/NGR 1:308 been disguised as the official dollar rate of our country only because of corruption and not market pressures or economics, resulting in: high inflation on consumer goods-locally and imported, high cost of imported goods, thus high cost of production-(most equipments and raw materials for production are imported), orchestrated USD scarcity and criminal exchange rate quotations economic, (If economic agents at all levels across all borders of our financial institutions are profiting hugely from the scarcity and criminal exchange rate, I am left to believe it must be orchestrated). The huge commission of 65% is criminal and is what is keeping our economy in this current state, FG financial policies control should address this; it could make itself the market quotation maker of both markets by stipulating the maximum percentage of profits on commission in both FX markets. It is not surprising to see well meaning Nigerians still calling for devaluation because from their own understanding these will end this criminal act and maybe bring economic stability. Now devaluing the naira like I said in my previous article (devaluation of naira) automatically means that Nigerian importers would buy goods in Yuan for instance and sell in naira so they either get a smaller amount for their money or charge customers more. In turn, many Nigerians are finding it difficult to pay for services like education, health care, accessories etc in other countries due to the devaluation. Thus, REVALUATION NOT devaluation is the solution; Revaluation of the parallel market FX rate is the first solution to end of this economic crisis, which will in turn reduce corruption, consequently, gearing us towards economic growth and BOOM, provided we have more to export.
Saefhenryosas
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