Banks and the
Peoples Democratic Party, PDP, have kicked against the decision of the Central
Bank of Nigeria, CBN, to bar foreign currency deposits into domiciliary
accounts.
The PDP described
the decision as illegal, unlawful, void, archaic and communist in nature,
stressing that the President should be reminded that as a country, Nigeria was
in a democracy and not military administration as in 1984.
A senior bank
treasurer and executive member of Financial Market Dealers Association of
Nigeria, FMDA, also described the policy as a knee-jerk measure, which was not
sustainable, adding that banks’ decision to stop dollar deposits into
domiciliary accounts was in protest of the new policy.
In a statement
signed, yesterday, by PDP National Publicity Secretary, Chief Olisa Metuh, the
party said that President Buhari’s regulations of the foreign exchange
transactions in Nigeria where the administration was making it impossible for honest
Nigerians to engage in free trade and regulate their personal activities as
guaranteed by the constitution, was clearly an agenda to illegally impose a
communist economic regime on Nigerians.
The party noted
that the absence of an economic team at the moment, especially in the third
month of the administration, was leading the country into economic quagmire and
doldrums.
The statement
read: “The Peoples Democratic Party (PDP) wishes to bring to the notice of
President Muhammadu Buhari that the apparent absence of an economic team in the
third month of his administration is leading the country into economic quagmire
and doldrums.
“In the past, we
had given examples of the devastating effect of lack of an economic team and a
clear-cut fiscal policy by this administration as evidenced in the lull and
painful decline in the stock market, spiral rate of inflation, the disastrous
outing of the government team in bilateral talks during the recent visit to the
United States of America and the shambolic state of our economy at present.
“This confusion
has been extended to operations and regulations of the foreign exchange
transactions in Nigeria wherein the government is making it impossible for
honest Nigerians to engage in free trade and regulate their personal activities
as guaranteed by the constitution, and this is clearly an agenda to illegally
impose a communist economic regime on Nigerians.
“The most
disturbing aspect of this communist economic agenda is the illegal and unlawful
attempt to repeal the provisions of the Foreign Exchange Monitoring And
Miscellaneous Provisions Act, otherwise known as Decree No 17 of 1995 and
replace it with unilateral imposition of new regulations.
“This Act remains
the subsisting law regulating the operations of domiciliary accounts in Nigeria
and by its provisions therefore, Nigerians are empowered to freely open and
operate domiciliary accounts.
“As such, any
enactment and or regulation inconsistent with the provisions of this Act are
deemed void. Thus, the recent foreign exchange transaction restrictions by this
government are illegal, unlawful and void. Besides the provisions of the law,
the PDP declares this administration’s archaic communist economic agenda as
unworkable and unsustainable.”
Naira bounces
back
Meanwhile, the
tough monetary policy stance of the CBN on the exchange rate of the naira has
started yielding result as the local currency appreciated weekend to a band of
N225 to N230 to the dollar, compared to N240 to the dollar at which it sold in
the last few weeks.
The apex bank had
barred 41 items from access to foreign exchange. It had directed that as from
August 1, all foreign exchange transactions in any Bureau de Change must have
the BVN of applicants as foreigners were said to have invaded the nation’s
foreign exchange market.
Banks last week,
in a bid to stem the increasing trend of the dollarisation of the economy,
started rejecting deposits of foreign currency in local banks.
Forex dealers
attributed the naira’s gain to excess supply of the greenback in the market,
even as it looked like a lot of speculators would lose out in the new trend.
It was gathered
from the CBN that commercial banks that currently had dollars in excess of $1
billion in their vaults, have started taking desperate measures to mitigate
currency risk. Bureaux de change (BDC)
operators disclosed that banks have stopped accepting dollars because they have
too much cash in their vaults.
As a result of
the development, banks have been rejecting dollar deposits into domiciliary
accounts, but customers are allowed to withdraw cash from their accounts.
“The reason the
banks have too much cash is due to speculation and money laundering. A lot of
people have been speculating against the naira and amassed so much cash.
“Then there are
those who have been amassing dollars obtained illicitly and want to launder
them.”
Banks protest
A senior bank
treasurer and executive member of Financial Market Dealers Association of
Nigeria, FMDA, who spoke to Vanguard on condition of anonymity, said the
decision by banks to stop accepting foreign currency deposits into domiciliary
accounts was in protest of the new policy.
He said: “There
was no official communication from CBN that it would no longer collect dollar
cash from banks. The whole thing started when two or three banks took their
dollars to the CBN for swap on Thursday, and the CBN rejected the cash.
“As a result,
banks now found themselves with huge volume of dollars that are practically
useless to them. To protest this development, banks have stopped accepting
foreign currency deposits across the counter into domiciliary accounts.
“The reality is
that accepting such deposits is useless to banks. They cannot trade the currency
and they cannot transfer it. So it is useless.”
He said the new
CBN policy implied that everybody who wanted to deposit into domiciliary
account was a money launderer, which was not possible.
“This negates the purpose of banking. It is a
knee-jerk policy, which is not sustainable, though it might force appreciation
of the naira in the parallel market in the short term.’’
Importers divert
businesses to neighbouring countries
President,
Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe,
told Vanguard that the policy had started impacting negatively on the economy
as importers had started diverting their businesses to neighbouring countries.
He said the
protest by banks had, however, started impacting negatively on the economy.
“The surplus
dollars in the street market is unavailable to the local importers as they
cannot transact with it through their bankers. The neighbouring countries are
having a field day mopping up the excess cash dollar liquidity, a very cheap
rate for the use of their imports to the detriment of the local importer.
“Our local
importers divert the payments of their imports to those neighbouring countries.
The local importers also divert their consignments to the ports of the
neighbouring countries.
“The current
market situation is enabling business activities to flourish in the
neighbouring countries,” he said.
CBN explains
rationale for policy
Although the CBN
did not officially announce the new policy to banks, it on Saturday issued a
press release, titled: “Renewed Vigilance to Prohibit Illicit Financial Flows
in Nigeria’s Banking System.”
The release,
signed by Ibrahim Muazu, Director Corporate Communication, CBN, stated: “The
Central Bank of Nigeria (CBN) notes with concern a recent report by the Global
Financial Integrity group, which ranks Nigeria as one of the 10 largest
countries for illicit financial flows in the world.
“Although we do
not have an independent confirmation of this assertion, the report estimates
that about US$15.7 billion of illicit funds go through our system annually.”
It added that
“CBN will increase its vigilance to ensure that Nigerian banks are not used as
conduits for illicit fund flows, especially in foreign currencies.
“We note and
applaud that in line with global best practice, Nigerian banks have started to
curtail the acceptance of foreign currency cash deposits, much the same way as
customers in other countries cannot just walk into banks and make foreign
currency cash deposits without proper documentation.
“We wish to
assure all citizens seeking foreign currencies for legitimate personal and/or
business interests that there remains ample opportunity to do so within the
law. The CBN’s Foreign Exchange Rules have many windows for accessing foreign
exchange for legitimate business as well as for personal commitments.”
