Peter Obi, the presidential candidate of the Labour Party in the 2023 elections, has condemned the reported clampdown on Bureau de Change (BDC) operators by government agencies, describing it as ill-advised and misdirected.
In a statement posted on his social media account, the former governor of Anambra State expressed concerns that the government’s actions would exacerbate the country’s exchange rate woes rather than alleviate them.
Obi asserted that targeting BDC operators would not address the root causes of Nigeria’s foreign exchange challenges. He argued that BDCs are not the primary suppliers of forex and merely serve as intermediaries for buyers and sellers of foreign currency.
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He said that similar to other economies, BDCs play a crucial role in facilitating currency exchange transactions.
“The recent reported attacks and disruption of the business activities of Bureaux de Change (BDCs) operators in different urban centers across the country by Government Agencies, are ill-advised and wrongly directed,” Obi stated in his post.
He further emphasized the need for a comprehensive approach to address the underlying factors contributing to the depreciation of the Naira. Obi emphasized the importance of transitioning Nigeria from a consumption-oriented economy to one driven by production, particularly export-led production.
“To think that the BDCs are the cause of the declining value of the Naira is a smack on rational economic thinking,” Obi remarked.
Additionally, he highlighted the need to combat corruption, which he identified as a significant factor fueling the demand for foreign currency.
“As long as Nigeria remains an unproductive economy and corruption continues unfettered with people in possession of unproductive excess cash, the value of our currency will continue to depreciate.”
The former Anambra State governor called on government officials to adopt a more nuanced understanding of modern economic principles and tailor their policies accordingly. He stressed the importance of addressing structural deficiencies and implementing measures that promote productivity and transparency in the economy.
The recent reported attacks and disruption of the business activities of Bureaux de Change (BDCs) operators in different urban centers across the country by Government Agencies, are ill-advised and wrongly directed.
— Peter Obi (@PeterObi) February 25, 2024
Obi’s remarks come in the wake of recent raids conducted by the Economic and Financial Crimes Commission (EFCC) against illegal BDC operators in various parts of the country on February 21, 2024. The crackdown is said to be part of the government’s efforts to curb illicit financial activities and enforce regulatory compliance within the foreign exchange market.
Before now, economists have shared Obi’s sentiment regarding Nigeria’s FX crisis, which has been significantly attributed to the nation’s declining oil revenue.
A series of advice has been provided to the government on how to boost FX liquidity as a solution to the country’s forex crisis. Here are some recommendations:
Promote Export Diversification: Nigeria’s economy is heavily reliant on oil exports, which exposes it to fluctuations in global oil prices. To mitigate this vulnerability and boost FX liquidity, the government has been advised to prioritize diversifying the export base by supporting non-oil sectors such as agriculture, manufacturing, and services. Encouraging exports in these sectors is said to have the capacity to generate additional foreign exchange earnings and reduce the country’s dependence on oil revenue.
Improve Ease of Doing Business: the government has also been advised to streamline bureaucratic processes and reduce regulatory hurdles to attract foreign direct investment (FDI) and stimulate economic growth. Experts say that by creating a more conducive business environment, the government can attract investment inflows, enhance productivity, and bolster FX reserves.
Enhance Foreign Investor Confidence: Implementing transparent and consistent economic policies has also been advocated as a way to instill confidence in foreign investors and attract capital inflows. According to economic experts, clear fiscal and monetary policies, as well as adherence to the rule of law, can help reassure investors about the stability and predictability of Nigeria’s economic environment.
Strengthen Monetary Policy Framework: The Central Bank of Nigeria (CBN) plays a critical role in managing FX liquidity through its monetary policy tools. The apex bank has been urged to implement effective monetary policies aimed at maintaining price stability and managing inflation, thereby instilling confidence in the domestic currency and attracting foreign investment.
Encourage Remittances: Remittances from Nigerians living abroad constitute a significant source of FX inflows. The government has been asked to implement policies to encourage diaspora remittances, such as offering incentives for formal channels, reducing transfer fees, and facilitating access to financial services for remittance recipients.
Combat Corruption: Corruption undermines economic stability and erodes investor confidence. Implementing robust anti-corruption measures and strengthening institutional frameworks for accountability and transparency is said to be key in curbing illicit financial flows and preserving FX reserves.
Invest in Infrastructure: Investing in critical infrastructure projects, such as transportation, energy, and telecommunications, can improve productivity, reduce production costs, and attract investment. Financial analysts believe that infrastructure development will enhance Nigeria’s competitiveness and attractiveness to foreign investors, thereby boosting FX liquidity.
Promote Financial Inclusion: Expanding access to financial services, particularly in rural and underserved areas, is said to be a way to promote savings mobilization, investment, and economic growth. The government has been advised to promote financial inclusion initiatives to broaden the investor base and stimulate economic activity, thereby contributing to FX liquidity.
Experts say that by implementing these measures in conjunction with a holistic approach to economic management, the Nigerian government can address the country’s forex crisis and promote sustainable economic growth. They added that it is essential to adopt a coordinated and multi-faceted strategy that addresses the root causes of FX volatility and strengthens the resilience of Nigeria’s economy.