Sanitising The Foreign Exchange Market | Independent Newspapers Limited
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Sanitising The Foreign Exchange Market

Posted: Mar 24, 2016 at 3:00 am   /   by   /   comments (0)


Last week, the federal government directed the Economic and Financial Crimes Commission (EFCC) to investigate the operations of the Central Bank of Nigeria (CBN), Banks, Bureau De Change (BDC) operators and some businessmen, with a view to uncovering the part they have been playing in the crisis in the foreign exchange market. The directive was in response to the urgent need to review the foreign exchange market to ascertain the level of compliance with the extant laws and regulations in the face of the sliding value of the naira and the scarcity of Forex.

While giving the directive, the Attorney General of the Federation (AGF) and Minister of Justice, Abubakar Malami (SAN), noted that the weakness of the naira was not as a result of neutral economic factors or directly related to demand and supply forces alone, but rather by carefully orchestrated criminal conspiracies and manipulations by unscrupulous elements, hiding under the cloak of the so-called ‘market forces’ and sabotaging the efforts of government.

This is, indeed, a welcome development considering that all the blame before now had been heaped on government and its economic policies without paying attention to the impact of some of the activities of these operators on the economy. We believe something needs to be done urgently to halt the coordinated and speculative activities in the foreign exchange market. The current wide artificial differential between the official rate at the CBN and the parallel market appears to defy rational economic analysis in spite of policies put in place by the apex monitoring bank. Sadly, it seems this situation has provided a juicy platform, which is being exploited by these unscrupulous individuals and institutions.

The CBN, under the leadership of its former governor, now the Emir of Kano, Mallam Sanusi Lamido Sanusi, had also initiated an investigation on the activities of BDCs. The investigators indicted about 20 BDCs for alleged money laundering activities, a development that led to withdrawal of their operational licenses at that time.  It is unfortunate that rather than the sanctions serving as deterrent, sinister financial activities  still find space in the activities of these institutions to warrant their official investigation when they should feature as reference points in driving foreign exchange management policies. Perhaps, it was against this backdrop that the CBN, earlier in the year, announced that it would, henceforth, discontinue its sale of foreign exchange to BDC operators.

Available Reports show that the current official demand for foreign exchange is over $30 billion, an amount that obviously exceeds Nigeria’s current foreign reserves profile, estimated at about $27 billion. We believe that no responsible government would watch this unrewarding scenario play out unmitigated.

More so, only recently,  CBN Deputy Governor, Dr. Joseph Nnana, at a meeting with the Joint Appropriation Committee of the National Assembly, revealed that about $20bn had been discovered lying idle in various domiciliary accounts of some privileged individuals, without being projected for any investment purposes by their owners. Experts say this is subtly being used to weaken the value of the naira against the quantum of dollars lying idle in these accounts.

Although the current crisis in the foreign exchange market requires a broad based monetary policy review that is more effective, we pander to the position of the federal government that there is probably a syndicated cabal in the operational chain of the CBN, other financial subsectors and some privileged Nigerians, who are engaged in some illegal and unwholesome financial activities for selfish reasons to the detriment of the naira and the Nigerian economy. Every support must be given to the effort by the government to sanitise and stabilise the country’s financial system, institutions and the foreign exchange market and save the naira.

We believe that the move to investigate these institutions is germane under the prevailing circumstances in the foreign exchange market.