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.
Information from The Guardian was used in this report.