What Exactly Is Going On Between The Nigerian Central Bank And AbokiFX?

What exactly is going on between the Nigerian central bank and abokiFX?

After receiving threats from the Central Bank of Nigeria, abokiFX, a popular mobile and web-based platform that collates the black market foreign exchange rates in Nigeria, announced on Friday that it will temporarily suspend the publication of rates on all its platforms for the time being (CBN).

According to the apex bank, the platform, which Governor Godwin Emefiele described as "illegal and criminal," was being used to conduct "illegal activity that undermines the economy," and would be shut down.

According to Emefiele, who spoke after the Monetary Policy Committee's two-day meeting in Abuja, the apex bank also intends to prosecute abokiFX's purported owner, Olusegun Adedotun Oniwinde, for "illegal forex trading" and "economic sabotage" in addition to the other charges.

According to Emefiele, the CBN does not recognize any other foreign exchange market window other than the Investors and Exporters (I&E) window. “I have given instructions to our experts to go after his website and let it be clear that we will go after him because we can't allow this to continue,” he said.

Why does Nigeria have different exchange rates than the rest of the world?

Oil production in Nigeria is the highest in Africa. This commodity contributes to the country's foreign exchange earnings, accounting for more than 90 percent of total foreign exchange earnings. Between 2014 and 2016, a drop in global oil prices resulted in a dollar crunch, which in turn triggered an economic recession in the United States.

Instead of a complete devaluation of the naira, the Central Bank of Nigeria (CBN) implemented a multiple exchange-rate regime. In order to accomplish this, a stronger rate pegged to the U.S. dollar was maintained for official transactions while a weaker floating rate was maintained for investors and exporters, which was known as the NAFEX window.

Besides the NAFEX rate, other rates have been established for travelers and small and medium-sized businesses (SMBs), and there is also the parallel or black market, where foreign currencies are traded unofficially and the value of the naira is frequently lower than the official rate.

Following a historic drop in oil prices triggered by the Covid-19 pandemic, Nigerians have faced an even greater scarcity of hard currency in recent months. Two naira devaluations were forced on the Central Bank of Nigeria (CBN) by market forces last year, in addition to other measures intended to stabilize the exchange rate, such as limiting forex deposits and withdrawals over the counter and prohibiting the sale of forex to exchange bureaus.

In March, the apex bank also replaced the official exchange rate, which was set at 379/$1, with the NAFEX rate, which was 410.25/$1. This was part of an effort to move away from a multiple exchange rate system, which is said to distort the market and frustrate foreign investors, and toward a single-rate system, which is said to be more efficient. As a result, Nigeria had only two interest rates – the NAFEX rate and the parallel market rate – from a total of nearly five different interest rates as of the beginning of 2020.

This is where abokiFX comes into play

Prior to the establishment of abokiFX, Nigerians interested in exchanging currencies in the unofficial black/parallel market could only obtain information on exchange rates manually, such as by calling money changers on the phone.

But the platform, which was established in 2014 and is now widely used for information on the value of the naira in relation to major foreign currencies traded on the black market, has gained widespread acceptance and popularity. It is used by market participants for trading, as well as news organizations for reporting purposes.

In recent weeks, and particularly since the Central Bank of Nigeria (CBN) stopped forex sales to Bureau De Change (BDC) operators a month ago, the value of the naira has plummeted dramatically, with the gap between the parallel and NAFEX rates becoming even more pronounced.

Prior to the ban, the local unit traded at around 520 cents to the dollar, but it dropped to 570 cents to the dollar on Friday. According to abokiFX data, the naira experienced its biggest single-day drop in several months the day before, falling by 8.00, or 1.42 percent, from 562/$1 on Wednesday to 570/$1 on Thursday, its biggest drop in several months.

Meanwhile, data from the FMDQ securities exchange window, where the official forex market is conducted, showed that the naira closed at 412.88 to the dollar on Friday. Speculators profit from the difference between black market and official rates by engaging in currency manipulation practices such as round-tripping and other forms of currency manipulation that have a negative impact on the value of the national currency.

Allegations of sabotage against the economy

He publishes arbitrary rates without consulting BDCs and uses his website for forex manipulations and speculations, according to the CBN Governor, who profits from the significant disparity between the rates quoted on abokiFX and the official exchange rate. Oniwinde, who is based in London, is being investigated by the CBN.

Emefiele went on to say that the apex bank had been looking into the platform's activities over the last two years. It happened that we asked one of our colleagues to call the abokiFX and inquire as to how he handles the rates.

“While Section 2 of the CBN Act makes it clear that only the Central Bank has the authority to determine the value of the naira, a single individual living in England continues to manipulate the exchange rate and earn a substantial profit, which he then withdraws through an ATM in London.

It is economic sabotage, and we will pursue him wherever he may be, reporting him to international security agencies, tracking him, Mr. Oniwinde, and bringing him to justice, because we cannot allow him to continue to engage in illegal activity that is destroying our economy, Emefiele said.

As part of the investigation, the CBN chief claimed that Oniwinde was an illegal forex dealer who had over 20 bank accounts in eight different banks, all of which were overflowing with money from speculative activities, and that he had sold "tens of millions of dollars" in foreign currency to several Nigerian companies, in violation of the country's foreign exchange laws.

abokiFX disproves the assertions

In a statement released on Friday, abokiFX debunked the Central Bank of Nigeria's claims and stated that all allegations leveled against its director had not been confirmed.

“While we await confirmation of all allegations against our director, we at abokiFX do not trade foreign exchange or manipulate parallel market rates,” the company says in a written statement. In addition to the allegations made in the media, we have not received any communication from any government agency, and our accounts have not been closed as reported in the media.

It has however temporarily suspended rate updates across all platforms in order to "gain a better understanding of the situation," and it "sincerely hopes that the suspension will result in the Naira appreciating from next week," according to the statement.

While final rates have been posted this evening, the abokiFX news section and the crypto rates section will remain active, according to a statement released by the company. With our decision to temporarily suspend online rate publication, we are aware that there will be limited visibility of parallel rates information, which will have an impact on many people's ability to make informed decisions.