The Central Bank of Nigeria, CBN is working on a new strategy to manage our economic crisis by seeking to amend laws that regulate the local foreign exchange market.
This latest proposal if granted, will empower the CBN to criminalize possession of foreign currency for more than 30 days, without depositing it in a bank.
The apex bank is proposing a string of new amendments to the Foreign Exchange, Monitoring and Miscellaneous Exchange Act (FEMM), because it believes the act is mostly flawed particularly in the current economic situation and seeks to amend a large portion of the act as seen in a document called the ‘Working Paper’.
The act signed into law in 2014 basically liberalized the foreign exchange market in Nigeria allowing for foreign investors to import money into the country and repatriate same freely.
Should this amendment bill be passed, a likely outcome will be Nigerians with domiciliary accounts will withdraw and hold foreign currencies in cash, rather than risk being forced to change money at government rates with better prices available on the parallel market.
To discourage that outcome, the Central Bank has proposed a two-year jail term or fine for anyone in “possession” of foreign currency “without depositing same in a domiciliary account within 30 days of its acquisition.”
The FEMM act allows for “foreign currency purchased from the market to be repatriated without restrictions”, according to Nairametrics.
It also“prohibits the seizure, forfeiture or expropriation of imported money by the government without providing exceptions.” But CBN now wants to have powers to seize any such foreign currency if the source is questionable.
The CBN is unhappy that the law “allows foreign currency in excess of five thousand dollars imported or exported subject to declaration of statistics reason only.”
The apex bank is recommending that it be granted powers to restrict or prohibit the exportation of foreign currency when and where necessary to “protect the economy”.
The CBN also wants an amendment that allows it has the powers to “prevent monopoly and hoarding and a time limit for deposit of foreign currency in the bank.”
Despite its stated goal of trying to stabilize the foreign exchange market and resolve the persistent dollar shortage, the Central Bank has curiously made several moves that have worsened the crisis. It has barred banks from forex trading and cracked down on money transfer operators, an important source of forex for the local market through remittances from the diaspora (both bans were later lifted).