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.”
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.”
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.”