What Does CBN's "Fight" With AbokiFX Mean For The Naira?

On Friday, Godwin Emefiele, the governor of the CBN, announced that the monetary policy team wants to shut down speculative trading of foreign exchange at the parallel market.

The apex bank governor further stirred up concerns among Nigerians when he pushed for a crackdown on abokiFX, a website that publishes daily parallel market rates.

AbokiFX's website is hosted in Arizona, U.S, and has been operational since 2014, according to data from its digital footprint. This means they have been around before President Buhari's election and Emefiele's appointment. Within these seven years, they have become an authority on parallel market rates in Africa’s biggest economy.

According to Emefiele, Oniwinde Adedotun, the founder of abokiFX, is milking its influence to trade millions of dollars to his advantage. As a result, the CBN opened an investigation into Oniwinde and abokiFX’s 25 bank accounts in Nigeria. The website, in turn, stopped publishing rates from Monday.

What does this mean for the naira?

On Monday, the first-day abokiFX did not publish rates, many Nigerians were uncertain of the naira-dollar exchange rate. This pointed to the void that was immediately created from the absence of a central authority on market rates.

Media firms resorted to informing their audiences through direct contacts with forex dealers in different parts of the country. From the look of things, nothing has improved as the dollar was sold for as much as N575 at the parallel market yesterday.

AbokiFX indeed wields a lot of power, which some might tag as unhealthy. Since they have gained a central status for unofficial rates, it is possible to manipulate rates, should they want to participate in forex trading. Emefiele suggested this is what the company was doing when he said they were selling tens of millions in foreign exchange to Nigerian companies.

If the CBN succeeds in shutting down abokiFX, a number of other platforms will try to fill that void, but with little success initially. The shutdown will lead to various naira-dollar quotes across the country. But it would be temporal and would not solve the actual demand and supply problem we have with forex in Nigeria, which needs more structural, long-term solutions.