The Central
Bank of Nigeria (CBN) may have taken a definite stance to shore up the value of
the naira against the persistent free fall of the currency in recent times, as
it banned the importation of all foreign currencies unless by regulatory
approval. The move, which is part of its determination to save the economy from
external threats and dominance, may also be a strategy to stem the rising tide
of Naira-Dollar speculations and unpredictable quantity of dollars in
circulation.
There were indications that the latest move was sequel to the bank’s
withdrawal of the operating licenses of 20 Bureaux de Change (BDCs) found to
have purchased and sold huge sums of dollars with no documentation to show
details of the transactions.
The Deputy
Governor in charge of Economic Policy, CBN, Dr. Sarah Alade, who recalled the
proceedings of the last meeting of the Monetary Policy Committee (MPC), said
the Management of the CBN frowned at the existence of strong foreign exchange
demand pressures from domestic sources, which are not necessarily matched with
increase in the importation of goods and services. Alade said the apex bank has
noted with displeasure the surge in dollar cash importation by Deposit Money
Banks (DMBs) and the huge cash sale of the U.S. dollars to BDCs by the DMBs,
which recently were found in breach of the operational rules. A source said
that the importation of these dollar has added pressure to domestic economic
activities as some outfits in the country are now collecting only dollar as a
means of payment.
However,
while noting that Nigeria currently ranks as the largest importer of United States
dollars, Alade disclosed that the purchase and sale of the cash is not adequately
documented by the BDCs. She explained that if the trend was not contained, it
could pose grave threats to the value of the naira as well as the Nigerian
economy, which she said had gradually become dollarized. Alade said the
management team of the bank, led by Mallam Lamido Sanusi, decided to take immediate
action to safeguard the naira and ensure its stability in the face of the
aforementioned challenges. Meanwhile, the Retail Dutch Auction System (RDAS),
which took over the operations of Wholesale Dutch Auction System (WDAS),
following its suspension at the official foreign exchange market will debut
today.
According
to a statement from CBN, RDAS will allow only customers of deposit money banks to
buy foreign exchange at the CBN through their banks as against the WDAS where
the deposit money banks bought foreign exchange at the CBN on their own accounts
and in turn sold to their customers. The re-introduction of the RDAS is
expected to prevent round tripping of foreign exchange purchased at the apex bank’s
official window to unauthorised channels. Also, a circular has been issued
mandating all DMBs to redeem all inward money transfers in naira to the
recipients at the prevailing inter-bank foreign exchange rate. “This is in line
with the best practices.” While condemning the action of erring BDCs, CBN
emphasised the continued relevance of the BDCs in the foreign exchange market,
even as it stressed that it would continue to support their operations in line
with the existing guidelines.
To guard
against stifling the activities of the BDCs, the apex bank has authorised all
deposit money banks to deal at the official foreign exchange market rate, warning
that banks can only sell foreign exchange cash to BDCs subject to a maximum of
$250,000 per week per BDC. The CBN also advised all BDCs to continue to comply
with the conditions of their operating licenses, including the proper rendition
of returns with respect to the purchases and sales of foreign exchange.
Source: (The Guardian)
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