President, of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, believes the floating of the naira and the unification of the foreign exchange market comes with benefits that will help sanitize the market.
He said the development will lead to the prevention of sharp practices in the market.
said, “The removal of the fixation of the cap at the I&E window is to allow for a true market clearance rate which has been the agitation of several stakeholders in the economy to harness and increase various sources of supply of greenback into the economy like Portfolio investment, direct foreign investment, diaspora remittances, export proceeds, etc.
“The directives, in my opinion, are to checkmate various illegal economic behaviors like rent-seeking, currency substitution, FX holding positions and frivolous demand. The naira volatility have continued to underpinned the slow economic growth in recent years.
“However, as we await the rule of engagement on the new directives the likely unintended consequences are as follow.”
In the short run, he added, “We will witness a panic and mild spike in the market that will push levels up. Secondly, in the medium term, we will begin to see our sources of dollars inflow increasing in the market to provide the needed liquidity in the market for rates stabilisation. The challenge in all of the above is how do we inject liquidity into the critical retail end of the market and a reference point for pricing in the economy which is characterised by volatility.”
