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.
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