Alhaji (Dr.) Aminu Gwadabe, the president of the Association of Bureaux De Change Operators of Nigeria (ABCON), has lauded the Central Bank of Nigeria’s (CBN’s) directive prohibiting the use of non-export Domiciliary Account Collateral for naira loans. Gwadabe expressed confidence that this move would bolster dollar liquidity, support reserves accretion, and fortify the financial services sector.
The directive, as per the CBN, prohibits the use of foreign currency-denominated collaterals for Naira loans, except in cases where the collateral comprises Eurobonds issued by the federal government of Nigeria or guarantees provided by foreign banks, including Standby Letters of Credit.
In response to the directive, Gwadabe emphasized its positive impact on the forex market, particularly in curbing the undue pressure exerted by big businesses and manufacturers. He commended the decision, stating that it would mitigate the depletion of available forex resources caused by such practices.
Additionally, Gwadabe recommended that the CBN review foreign currency holding guidelines for non-oil export domiciliary accounts proceeds. He suggested implementing a maximum holding period of 48 hours with a minimum balance requirement for individuals and companies, similar to practices observed in South Africa.
Furthermore, Gwadabe urged the CBN not to approve forex requests by manufacturers and other business applicants with substantial holdings in export oil proceeds domiciliary accounts, stressing the importance of maintaining market stability and confidence.
ABCON’s leadership also advocated for the separation of ownership and operational structures of FMDQ Exchange to enhance transparency and effectiveness in market operations. Gwadabe emphasized the importance of legislative decisions on planned reforms in the BDC sub-sector to boost foreign investors’ confidence and sectoral transformation.
In conclusion, Gwadabe pledged ABCON’s continued support for the CBN’s proactive policies aimed at addressing volatility and challenges in the forex market. He commended the CBN’s reinstatement of the BDC sub-sector, noting its effectiveness in curbing hoarding and speculation in the forex market.
