THE Central Bank of Nigeria is not succeeding yet at improving the value of the Naira against major international currencies at the black market, almost one week after backing the new policy by commercial banks of rejecting deposits into domiciliary accounts.
The move –meant to curb speculation, discourage the inflow of proceeds of crime into Nigeria and limit avenues of corrupt officials holding their loot in foreign currencies –is being frustrated.
The dollar, pounds and euro are still exchanging at abnormally high rates, in spite of the policy.
By Friday, August 7, 2015, the dollar exchanged for N215 to N223, pounds N325 to N333 and euro N220 to N240.
On Monday, August 10, 2015, the story was hardly different. The dollar was N220 to N230, pounds N330 to N350 and euro N230 to N240.
Concerned Nigerians are apprehensive that the objective of the policy is being frustrated by its target –criminals, money launderers, corrupt officials and forex speculators and traders.
Many jubilated that the regime of illogical foreign exchange rates was over once banks agreed to stop accepting deposits into domiciliary accounts. Legions woke up to see messages on their phones to the effect that foreign currencies would no longer be accepted as deposits in banks.
GTBank had on Saturday, August 1, 2015, sent this message to their customers:
Temporary Suspension of Foreign Currency Cash Deposits
Please be informed that due to the unavailability of outlets for managing foreign currency cash deposits, we have found it necessary to temporarily suspend receipts of foreign currency cash deposits into domiciliary accounts at all our branches nationwide from Monday, August 3, 2015.
In addition, foreign currency cash deposits into domiciliary accounts made prior to this notice will not be eligible for outward electronic transfer and can only be withdrawn as cash.
Please note that this temporary measure, does not affect electronic transfer of funds into or from your domiciliary accounts and, you will continue to have access to foreign currency cash withdrawals from your account.
Whilst we have had to take this step to temporarily suspend foreign currency cash deposits, we would like to assure you that we are working hard at finding alternative outlets and a quick solution to this situation.
Kindly accept our sincere apologies for any inconvenience this might cause.
Thank you for banking with us.
That weekend, the governor of the Central Bank, Godwin Ifeanyi Emefiele, in an interview with This Day, admitted their support for the new policy.
Excerpts of the interview read:
Approximately, how much of this foreign currency do we have in the banking system?
I don’t have the exact amount, but I believe it is over $1 billion cash.
By rejecting foreign cash deposits, is the CBN not tampering with people’s ability to operate domiciliary accounts?
No, there is no attempt to tamper with people’s ability to operate domiciliary accounts. But what we are saying is that we would support the banks when they say they would not accept dollar deposits in domiciliary accounts.
So, for those that need to transfer monies for school fees, medical bills and other legitimate transactions, how do they do that?
Our foreign exchange regulations provide how people can carry out their legitimate businesses, including payments of school fees, mortgages and other bills. All you need do is to go to your bank, fill the Form A and support it with the relevant invoices and the dollar will be wired to wherever you want it wired for your legitimate transactions. Don’t forget, before now, we always had BTAs and PTAs and what we did was to complement it with the activities of the BDCs. We made it more flexible, so we have BDC’s carrying out retail transactions for those who are travelling and want to pay medical bills. What we are saying is that these transactions must be done within the ambit of the law. The problem we have is not people who want to carry out legitimate transactions, either for payment of school fees and others, but we have certain people who are involved in current substitution. There are certain people who got their wealth illegally and are thinking of the best ways to launder these funds. That is the main issue.
But there are some people who also consider the dollar as a better store of value?
Every country has its own legal tender. In Nigeria, our legal tender is the naira. In the US, the legal tender is dollar, the UK has the pound sterling. So, the citizens of that country are obligated to store their value in the legal tender of those countries. Let me put it this way, can you imagine if you choose to store your money in dollars and 170 million other people also choose to store their money in dollars, do you know what would happen to our legal tender? Do you know what would happen to the reserves of the country? So, that is why it is not advisable for anybody to contemplate that the best way they want to store their money is in a currency that is not the legal tender of that country.
And by mid-week, CBN officially directed banks to stop accepting deposits into domiciliary accounts.
The apex bank issued the following statement through Olakanmi I. Gbadamosi, Director, Trade and Exchange Department, “It has considered the recent statements by deposit money banks concerning the large volume of foreign currencies in their vaults and their decision to stop accepting foreign currency cash deposit into customers’ domiciliary accounts as a welcome development.
“For foreign currency cash lodgements made prior to the date of this circular, the account holder has the option to either withdraw his or her foreign currency cash or the Naira equivalent. For the avoidance of doubt, only wire transfer to and from domiciliary accounts are henceforth permissible.”
The CBN clarified that those sourcing foreign currency for eligible and legitimate purposes such as BTA, PTA medical, mortgage, school fees, goods, etc, should through recognised channels with the use of Form ‘A’ for “invisible” and Form ‘M’ for “visible” transactions.”
The new policy immediately sanitized the forex market by the weekend of Friday, July 31, through Monday, August 3, 2015.
The dollar nosedived from N245 to N205, pounds exchanged for N290 to N320 and euro traded at N220 to N230 at the parallel market.
Naira’s appreciation was, however, short-lived. By Tuesday, August 4, speculators and money launderers hit back, with the Naira losing some of its value.
Dollar traded at N215 to N220, pounds N290 to N318 and euro N220 to N230.
The story was worse by Thursday, August 6, 2015. The dollar exchanged for N220 to N225, pounds N318 to N325 and euro N240 to N246.
Those who used their Automated Teller Machine (ATM) cards abroad were battered by the exchange rates used by their banks.
On Friday, August 7 and Saturday, August 8, 2015, a top bank used N352 to a pound as exchange rate!
The battle to protect the Naira has always been successfully resisted by speculators and money launderers. Most of the moves by CBN are thwarted and frustrated!
Its recent policy of delisting 41 items by importers from accessing foreign exchange hardly protected the Naira. The traders simply went to the black market to source funds for what Nigeria can successfully produce.
Some of the items listed are rice, toothpick, cement, margarine, poultry products, roofing sheets, wheel barrows, soaps, steel nails…
To further create avenue for accessing foreign exchange for genuine and important needs, the banks have started selling personal and business travel allowances.
On Saturday, August 8, 2015, one bank sent this message:
“Commencement of PTA and BTA Sales and Review of International Spending Limits on Your Naira MasterCard
This is to inform you that we will commence the sale of Personal and Business Travel Allowance (PTA & BTA) from Monday, 10th August 2015 at select branches across the country. This means that all intending travellers can now purchase foreign currency at designated GTBank branches up to a quarterly limit of $5,000 and $4,000 (for BTA and PTA respectively) or its equivalent in GBP and EURO.
Please find requirements below:
Business Travel Allowance (BTA) Personal Travel Allowance (PTA
Valid visa and return ticket Valid visa and return ticket
Valid International Passport Valid International Passport
Copy of Certificate of Incorporation
Letter of Invitation from offshore
Business counter party
Letter of nomination from your employer
However, in view of the increased difficulty in sourcing foreign currency to settle international transactions on Naira MasterCards, we have reduced the daily international spending limit on your Naira MasterCard to $300.This means that you can only spend up to $300 daily when using your GTBank Naira MasterCard for international payments via POS and online.
You will, however continue to have the option of paying for medical bills, school fees, mortgages and credit cards using Form A, as these are eligible transactions for foreign currency. Simply visit any GTBank branch to complete a Form A along with the required documents to make these payments.
Kindly accept our sincere apologies for every inconvenience this might cause, and we would like to assure you that we are working hard at finding alternative sources for foreign currency and a quick respite to this situation.”
To further assure Nigerians that the battle to make Naira appreciate will be fought fiercely, the CBN put certain needs for foreign exchange as priority.
A statement published on Monday, August 10 read:
CBN WILL MEET FOREX DEMAND FOR ELIGIBLE INVISIBLE TRANSACTIONS
The Central Bank of Nigeria (CBN) wishes to inform the general public that all legitimate requests for foreign currency for eligible transactions, normally referred to as ‘invisibles’, such as remittances for school fees, student maintenance allowances, Business Travel Allowance (BTA), Personal Travel Allowance (PTA), medical and other eligible transactions, shall be fully met at the official/interbank exchange rate. Already all the legitimate demands for such transactions through recognized channels have so far been fully met by CBN.
The CBN hereby directs all authorized dealers in foreign exchange in Nigeria to henceforth treat as top priority all legitimate demand for foreign exchange for eligible transactions.
The CBN once again advises individuals that wish to source foreign currency for such eligible transactions to approach their banks with their legitimate demand as the CBN has made adequate provisions of foreign currency for all such legitimate and eligible purposes.
Furthermore, holders of naira denominated debit and credit cards shall continue to have access to the use of their cards at POS machines in any part of the world but subject to the annual limit of $US 50,000. ATM withdrawals (cash) shall continue to be a maximum of $300 per day.
The general public is hereby advised to channel any complaints arising from any authorized dealer’s refusal to process such legitimate demand to the Director, Consumer Protection Department, Central Bank of Nigeria, for necessary action. E-mail address: email@example.com
Will the naira ever appreciate at the black market, almost matching the official rate of N196-N199 to a dollar? That is the question many Nigerians are waiting to be answered by the CBN.