Association of Bureaux De Change Operators of Nigeria (ABCON) has advocated for reforms that will reduce government spending and also curb the rising trend in the nation’s public debt.
Meanwhile, the association has reiterated its commitment to enhancing capacity of BDC operators especially through the ongoing nationwide training of operators on BDC operations, adding that this will boost government efforts at achieving stable exchange rate of the naira.
The association made this call in its Quarterly Economic Review for the second quarter of the year (Q2’21), noting that the vulnerabilities identified with the rising debt profile expose the country to the risk of future high economic and development costs of having to deal with large debt overhang.
Stressing the need for caution in decision making in government circles, ABCON said: “The fact that remarkable economic recovery is not certain and the rather unstable state of financial markets is indicating that the country could be on the verge of a major debt crisis.”
In its recommendations on how to tackle the rising profile of the nation’s public debt, the association said: “There is therefore a serious need for the introduction of fiscal reforms that would scale down government spending and to consider restructuring the loan profile and especially properly examine the conditions tied to Chinese denominated debts.
“We recommended a season of economic austerity to replace the increased debt pile up for the coming generation. Moderation of governance and other administrative costs along with blocking loopholes/leakages from inflated contracts will more than satisfy the need for increased debts.”
ABCON also called for realistic measures to redress the ever-existing and increasing margin between the official and parallel market exchange rates.
According to the association, “It is ambiguous to conclude that because the volume of transactions that pass through the official market is larger than the parallel and thus it is rational to adopt the exchange rate from the official sources as the realistic rate. The obvious mobility of funds between the markets actually voids this proposition.
“Most industrialists, especially from the manufacturing sector patronise the two markets and of course derive their planning data and parameters based on the parallel market exchange rate. Thus, if all other economic indicators take inputs from the industrial sector performances, there is therefore a mismatch in basing other determinants on the official exchange rate.”
Consequently, ABCON called for an industrial policy to achieve local substitutes for industrial and mercantile input that depend on foreign exchange.
“Most industries established in Nigeria are designed to depend on the parent companies abroad for raw materials and thus must always demand foreign exchange.
the demand-push pressure on the foreign exchange market in the long run and stabilise the exchange rate”, it stated.