In recent weeks, Nigeria’s naira has experienced a sharp decline in both the official and unofficial markets, attributed to heightened forex demand and soaring prices of goods and services nationwide.
According to Premium Times, trading at the spot market saw the local currency average around N1500 last week, concluding the week at a record low of N1,665.50/$1 on Friday, according to data from FMDQ.
Meanwhile, at the parallel market, amidst concerns over supply constraints and market uncertainties, the naira plummeted to an all-time low of N1,700 and above.
Responding to this concerning trend, the Nigerian government implemented significant measures and reforms aimed at stabilizing the foreign exchange market and curbing speculative activities. These efforts have begun to bear fruit, with the naira showing signs of slight appreciation over the weekend.
Market data from Sunday revealed that the dollar was traded at N1,500 at the parallel market, marking a notable improvement from the N1,720 and above observed the previous Friday.
Restriction on digital assets platforms
Last week, the federal government took decisive action to address the depreciation of the naira against the dollar by implementing various measures, including blocking the online platforms of Binance and other crypto firms. This move aimed to prevent further manipulation of the forex market and curb illicit fund movements.
In addition to Binance, platforms such as Forextime, OctaFX, Crypto, FXTM, Coinbase, Kraken, and others were also blocked as part of the government’s efforts.
Earlier in the week, the office of the National Security Adviser issued directives to law enforcement agencies to take strict actions against individuals involved in speculation in the foreign exchange market.
Furthermore, the government disclosed its intention to raise $10 billion to enhance liquidity in the foreign exchange market, indicating its commitment to addressing the challenges faced by the currency.
BDCs
In a proactive move to combat currency racketeering, the Economic and Financial Crimes Commission (EFCC) conducted simultaneous raids and arrests of Bureau de Change (BDC) operators across various regions in the country last Monday.
These raids carried out in coordination, aimed to disrupt the activities of currency speculators and individuals perceived to be undermining the stability of the Nigerian economy.
Last Wednesday, in a joint operation with other security agencies, the Enugu Zonal Command of the EFCC apprehended 115 suspected currency racketeers in Enugu State.
The suspects, consisting of 113 males and two females, were nabbed in a sting operation conducted at Owerri Road, Ogui, Enugu State. The operation was based on credible intelligence regarding the dubious activities of certain BDC operators, currency speculators, and street hawkers engaged in illegal foreign exchange markets in the state.
According to a statement by the EFCC, seized items from the suspects included N110,700,000.00, $8,368.00, £145.00, €2,725, 900 South African Rands, 32,000.00 CFA, 100 Turkiya, and 500 Bank Mozambique currencies in various denominations.
Additionally, a safe abandoned by one of the street hawkers was recovered during the operation. Preliminary investigations revealed that some of the suspects are foreigners from Niger Republic. They will soon face charges in court, as stated by the commission.
CBN reforms
In the past week, the Central Bank of Nigeria (CBN) has implemented several directives aimed at addressing the ongoing naira depreciation crisis in the country.
On Wednesday, the CBN issued a circular to all banks, announcing the discontinuation of cash payments for Personal and Business Travel allowances (PTA/BTA). In a bid to enhance transparency and accountability in the forex market, the CBN mandated that all banks process these allowances solely through electronic channels. Hassan Mahmud, the Director of the Trade and Exchange Department, emphasized the importance of adhering to the eligibility criteria outlined in Memorandum 8 of the Foreign Exchange manual and the circular dated February 20, 2017.
Furthermore, the CBN urged authorized dealers and the public to promptly comply with the new directive to ensure a smooth transition to electronic payouts.
Responding to concerns about inconsistent import duty assessment levies, the CBN issued another directive on Friday. It advised the Nigeria Customs Service to utilize the closing foreign exchange rate in the official window for import duty calculations, aiming to streamline the process and reduce discrepancies.
Additionally, the CBN released revised regulatory and supervisory guidelines for Bureau de Change (BDC) operations in Nigeria, signalling a renewed focus on ensuring compliance and efficiency in the foreign exchange market.
New directives
Among the directives outlined in the newly revised guidelines, the CBN specified that certain entities such as banks, government agencies, and NGOs are prohibited from holding ownership stakes in Bureau de Change (BDCs).
According to the CBN, BDCs are permitted to engage in activities such as buying and selling foreign currencies, issuing prepaid cards, and serving as cash points for money transfer operators. However, they are not authorized to accept deposits, extend loans, trade in gold, or participate in capital market activities.
Furthermore, the CBN’s guidelines stipulate that BDCs can acquire foreign exchange from authorized dealers, travellers, hotels, embassies, and other sources. However, transactions exceeding $10,000 require the declaration of the source of funds.
In its statement, the CBN emphasized that sellers providing the equivalent of USD10,000 or more to a BDC must disclose the origin of the foreign exchange and comply with all Anti-Money Laundering/Combating the Financing of Terrorism/Combating Proliferation Financing (AML/CFT/CPF) regulations, as well as foreign exchange laws and regulations.
The bank also outlined various sources from which BDCs may obtain foreign currency, including tourists, returning diaspora members, and expatriates receiving foreign exchange from work, travel, investment, or domiciliary accounts. Additionally, BDCs may source foreign exchange from residents, International Money Transfer Operators (IMTOs), embassies, authorized foreign currency-buying hotels, the Nigerian Foreign Exchange Market (NFEM), and any other sources designated by the CBN.
Forex transfers
As per the new guidelines issued by the Central Bank of Nigeria (CBN), customers are now permitted to transfer foreign currencies from their domiciliary accounts with Nigerian banks to Bureau de Change (BDCs).
Under these guidelines, all digital or transfer purchases of foreign currencies will be credited to the BDC’s Nigerian domiciliary account, as stated by the CBN. Additionally, payments for such digital or transfer purchases of foreign currency by a BDC will be made through transfer to the customer’s Naira account.
In cases where the customer is a non-resident, whether Nigerian or not, the CBN specified that a BDC may issue the customer a prepaid NGN card. It further clarified that relevant maximum credit and cumulative limits, by relevant Know Your Customer requirements, will be applicable in such instances.
Furthermore, the guidelines outlined those payments to customers for cash purchases of foreign currency, exceeding the equivalent of $500, will be made through a transfer to the customer’s Naira bank account.
Financial experts have interpreted this recent action by the CBN as a proactive step aimed at asserting control to curb forex manipulation in the country. They emphasize that for the central bank to effectively manage BDC operations and restrict certain entities from owning BDCs, strict compliance with regulations governing forex transactions must be prioritized.
Surveillance on Governors
To preempt any developments that could adversely affect the Nigerian currency, insider sources disclosed to PREMIUM TIMES that the government has implemented measures to closely monitor all suspicious activities within the foreign exchange market leading up to the Federation Account Allocation Committee (FAAC) meeting scheduled for Thursday.
According to reports by PREMIUM TIMES, there was significant concern within the Central Bank of Nigeria (CBN) regarding the potential further weakening of the Naira as FAAC prepared to disburse allocations from generated revenues among the federal, state, and local governments.
Sources within the apex bank revealed that there were apprehensions surrounding the illegal conversion of FAAC funds into dollars by certain corrupt state governors within the unofficial market, subsequently impacting the local currency’s value.
It has been alleged that some governors engage in substantial conversions of Naira to dollars in the parallel market upon the disbursement of FAAC funds. These funds are purportedly routed through questionable bank accounts to Bureau De Change operators, who then provide cash in dollars to the governors. This illicit practice, authorities believe, is contributing to destabilizing Nigeria’s foreign exchange market.
Over the weekend, heightened security measures were reportedly deployed to monitor illicit activities within the forex markets, as part of broader efforts to stabilize the market and safeguard the value of the Nigerian currency.
Source: Premium Times
