Great decision from the AbokiFX team and it is a very smart one because FX manipulation is a global crime. But as I have noted, you cannot believe anyone including the Central Bank of Nigeria (CBN) on this one since there is really nothing compelling the nation is doing to strengthen the Naira.
Our balance of payment continues to move to the unfavourable territory due to lack of catalytic infrastructures like electricity to drive local production. Our productivity continues to fade as Nigeria continues to remove merit from all domains of the public sector. As the nation waits for Dangote Refinery to save it from fuel subsidies and wastes, AbokiFX is now expected to save the collapsing Naira from the forex paralysis.
But AbokiFX has offered a challenge: we will not publish new FX rates on Naira, and now it is for the nation to see what happens to Naira. This is a pseudo experiment and with no information on what the parallel rates are, people can converge, in the short-term, on whatever the apex bank offers with a variance of few points.
But that will not last. Yes, you cannot take Nigeria to the industrial age, pre-internet era where supply was the most dominant part of the market systems due to information asymmetry (think of buying an air ticket where you paid whatever the agent told you because you did not know what the airlines were charging). Today, aggregators and demand controllers are catalytic because everyone has unbounded sources, and platforms remove the frictions by brining all info in one place. So on that, I am not sure the suspension of AbokIFX will save Naira when Naira cannot save itself fundamentally because another aggregator will emerge.
Why? Once people do not believe whatever the apex bank is posting as the FX rate, they will converge to another AbokiFX to believe whatever it has there to conduct transactions. Of course we do hope the digital platform will be decent enough not to use its market power to illegally distort market equilibrium.
Following the news that the Central Bank of Nigeria (CBN) is going after exchange rate aggregator and publisher, AbokiFX, the online platform has issued a statement announcing that it’s suspending its publishing of parallel market exchange rates until further notice.
The CBN governor Godwin Emefiele on a TV interview, alleged that AbokiFX has been responsible for the free-fall of the naira by manipulating market prices.
The naira depreciated to N570/$1 on Friday despite the apex bank’s efforts through monetary policies to stem the tide. However, experts believe that the continuous crash of the naira is as a result of insufficient dollar liquidity in Nigeria. Increase in demand for is said to be forcing the CBN to deplete Nigeria’s dollar reserve, fueling the fall of the naira.
Data from the CBN shows $116 billion to be the total dollar inflow to Nigeria’s economy in 2020. Compared to 2019’s $142 billion and 2014’s $160 billion, there are 20% and 30% drop in dollar inflow to the economy respectively. The situation was compounded by the economic strains emanating from covid-19 pandemic.
AbokiFX said it hopes the suspension of its FX rates operation, among other things, will help the naira to appreciate in parallel market. Read full statement below:
With AbokiFX self-suspending, Naira may start waking from coma but until we have warehouses and factories operating well, Naira’s FX disease will remain. CBN should work to fix that and wake up those engines of exports.
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