As I said last time, change has come in Nigeria, but it appears it will take some time for people to get used to the new normal that change is bringing. Although Nigerians must learn to exercise patience and apply discipline, the authorities will also need to recognize quickly that humans are economic beings and will exploit every opportunity for profit. When the authorities wittingly or unwittingly create exploitable gaps, people will often find a way to throw morality out the window and exploit the gaps. Why do people hawk goods and services on the major roads? Well, because they can do it. They do it because lax traffic rules permit people to exploit an opportunity to sell to motorists who are prepared to pay a small premium in price and take a risk in possible purchase of counterfeit goods, in order to avoid the burden of driving to the store where they may have to find a place to park their car and where they may also have to be in shape to climb stairs. So, the price of convenience is the gain to the street hawker. Now what causes the street hawker to resort to fleecing, charging excessively high prices? This can happen when the motorist must get the merchandise right away, or as when there is a fuel shortage, the motorist cannot readily get the merchandise anywhere else. This brings up opportunism for the hawkers. Hawkers of foreign exchange and their buyers are practically in the same type of market. The foreign currency hawker or Mallam as they tend to be and are popularly called in Nigeria will raise the price of foreign currency on the buyer if he sees that alternatives to the buyer are limited. To close the foreign exchange gap, the authorities would need to strive to diligently monitor and if possible engage all persons selling or hawking foreign currency. I have never been for throwing bureau de change BDC operators and the mallams out the window. These guys are extremely important in developing countries where the currency is usually not fully convertible. If well monitored and engaged, the BDCs can help monetary policy authorities control or even optimize exchange rate gaps. I am not suggesting that the Central Bank sell them foreign exchange right away as before, I believe the CBN took the right decision when it did, but don't hurry to put this decision into the nationâ€™s constitution. In light of the change that has come there may be reason down the road after there is increased transparency and good behavior to work with the BDCs to the good of the nation. I believe that the CBN working with folks on the fiscal side can find a way to stop round tripping, which I know is the main reason for the widening gap between the official exchange rate and the parallel market rate. The so called currency speculators are amongst us folks, they are not in the bushes, hiding. I am Magnus Kpakol and that's my view.
Posted: Mar 16th, 2016 @ 04:08:32 AM