The AbokiFX Saga

Good Day Readers, 

It has indeed been a minute since the last post and even though I hate giving you excuses, it has been due to reasons beyond my control. I can only do better!

The past week in the Nigerian financial sector has been something far from a mirage. From the further collapse of the Naira which is now somewhat of a constant reality; to the comments made during the address given by Mr Godwin Emefiele, the Governor of the Central Bank of Nigeria CBN (which by the way is long overdue). I cannot but hope that Nigeria has not become a ship without a captain navigating through turbulence and mishaps in a sea of troubles. 

Last week saw the Naira fall yet again to around N575 to $1 which prompted another outcry from the Nigerian populace. I would like to believe that this outcry finally compelled the apex bank Governor (who is meant to be the Commander in chief in the defence of the Naira) to address the issue. Nonetheless, some of the comments made by the Governor can be termed controversial and this sparked further outcry by Nigerians who believed the address indicated how clueless the CBN was in the fight to keep the Naira afloat. 

The CBN governor, Mr Godwin Emefiele accused AbokiFX, a platform that provides "live" exchange rates in Nigeria's unauthorised parallel market of the fall of the Naira and even went as far as declaring the CEO of AbokiFX wanted. Mr Emefiele's comments were greeted with disbelief as Nigerians could not phantom how their trusted go-to platform for "correct up to date" rates was being thrown under the bus. Today's post is going to explain how AbokiFX can indeed manipulate the market. 

I would like to start by stating that this is in no way saying that AbokiFX is the reason for the fall of the Naira Neither is this supporting (or even going against) comments made by Mr Emefiele. The purpose of this post is to explain how AbokiFX like any other party including you and I can affect FX rates. 

To put this in perspective, certain questions as to how AbokiFX operates have to be put into consideration. For example, how Is their data being sourced and how do they get daily updates if none of the Nigerian banks give same nor work with them? How many Bureau de Change (BDC) do they consult to produce data daily? Do BDCs have an association that come together to agree on daily rates? Finally, what does AbokiFX stand to gain in the fluctuating FX market. 

Over the weekend, AbokiFX released a memo saying “data published is from different sources on the streets of Lagos”. It is important to note that this claim cannot be verified and even if found to be true, how can whatever data from different sources on the street be valid enough for worldwide publication and countrywide use.

Also, these BDCs do not have a unified body or association that can be consulted for matters such as daily rates and even if they did, how each BDC determines the rates cannot be trusted. AbokiFX again said they don't trade in FX but I can say confidently that the claim is very wrong. AbokiFX is owned by a Nigerian individual and the company is registered in the United Kingdom. A Nigerian embarking on this type of smart business venture would surely have strong ties back home and would have had to trade FX directly or indirectly.

Information from undisclosed sources making the rounds states that an investigation into the account of Aboki FX in Nigeria has begun. Let me simply put it this way, Abokifx cannot explicitly collapse the Naira but the "data" published if not correct can displace the Naira by a difference of between 5 - 20 Naira which is a lot of money if we think about how much FX affects revenue generation for a lot of businesses in Nigeria. Also, if individuals like you and I hoard dollars, this would drive the value up in the same way AbokiFXs' data manipulation can affect the Naira. 

The effect of these incorrect rates are so much but the most daunting of them all is that it creates a sense of scarcity thereby driving up demand which leads to a constant artificial increase in the price of dollars. For example, a pen should originally be distributed at 17 Naira but a body claims the price of the pen is 25 Naira which then leads to scarcity from people hoarding pens and buying more than they need thus driving the original distribution price from 17 Naira to even higher than 25 Naira. 

I would like to reiterate that the problem does not all fall at the feet of AbokiFX but the Nigerian government and the Central Bank of Nigeria for not having a body regulating rate websites like AbokiFX or for not even having a rate guide website that can be trusted by Nigerians. Why would I go to AbokiFX if CBN can give me a clear guide on FX rates daily? The remedy after death attitude must stop and I dare say it is time for them to grab the bull by the horn. 

AbokiFX has now suspended updates of daily rates due to this accusation but I can say unequivocally that the suspension of those operations will not play well in the favour of CBN in the short run. In other words, we should expect a further fall of the Naira by another 20-30 Naira within the next 2 weeks as a result of the suspension of operations by the accepted rate guide platform AbokiFX as BDCs and other individuals will start quoting FX rates blindly. 

Till the next post;

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