By Elizabeth Chukwuma
Between 2015 and now, the Nigerian local currency , the naira, has continued to slide against the North American country of the United States, US, dollar, and other major currencies in the world including the United Kingdom, UK, Pounds and the ERO. The situation is so bad that the Godwin Emefiele, led Central Bank of Nigeria, CBN, had repeatedly accused the operators of the Bureau De Change, BDCs, of killing the naira.
The fallout has been the consistent suspension of the sales of Forex to the BDCs as a way to stabilize the naira. The CBN , had made Nigerians to believe in the recent ban, that it was necessary because the BDCs has become become conduit for illicit forex flows in the country and graft.
Emefiele, the CBN governor, who is not happy that the BDCs, are now used for graft , may have further expressed his anger when he said that the apex Bank will ‘’no longer process applications for the BDC licenses in the country’’. He may have been encourage to take the extreme decision exclude the BDCs, from the Forex market because of the alleged complaint from some Multilateral Financial Institutions, Embassies and donor agencies that the illegal transactions of the BDCs, had hindered the flow of Forex into the country.
Perhaps, to discourage the international bodies, Embassies and donor agencies from channeling their Forex through the Black market instead of the of using the official investors , import and export window, called NAFEX , to do so, had no option but to ban the sale of Forex to the BDCs .In spite of the ban on the sale of Forex to the BDCs, the situation in the Nigerian Forex market has not changed as the naira has continued to depreciate.
The CBN, may have seen the Microfinance Banks, MFBs, as another Financial Institution killing the naira, claiming that the MFBs Licensed to operate in the country have started engaging Forex transactions and other unauthorized dealings. Emefiele, the CBN governor, who could not hide his feelings was to have made it clear to the MFBs, operators, that they are meant to focus their primarily on providing financial services to retail and micro-clients and not going fully into whole sale Banking or sale of forex to Customers which is the exclusive responsibilities of the Banks. The Bank may have its reason
. This because of its low Capitalisation compared to the Banks which have a N25 billion Capitalisation base. It was therefore not very surprising why the CBN had warned the MFBs, to stop engaging in whole Banking and foreign exchange transactions as it poses a significant risk with dire consequences for the country’s Financial stability
Perhaps to make the MFBs understand that it bite, it has warned the operators, ‘’to stop engaging in Foreign exchange transactions and other unauthorized Financial dealings . At the instance of the CBN governor, Ibrahim Tukur, from the apex Bank Financial Policy and Regulation Department, on Friday, August 20, 2021, had issued a Circular, to the MFBs, titled , ‘’Cessation of Non-permissible Activities’’.
In releasing the circular, Tukur noted that ‘’the CBN, has observed the activities of some of some of the MFBs operating in the country and found out that they have gone beyond the remit of their operating licenses by engaging in whole sale Banking and forex transactions’’.
.The CBN, governor would want the MFBs operators ‘’to strictly comply with the extant Revised Regulatory and Supervisory 2012, Guidelines, for their operations’’. He has made it to those that cares to listen that the apex Bank will not hesitate to sanction any MFBs which contravenes the 2012, Revised Regulatory and Supervisory Guidelines for their operations based on their remit. He insists that the ‘’MFBs are strictly prohibited from Foreign Exchange transactions’’.
For now, the Emefiele led CBN, which under pressure to stabilize the naira and stop it from further sliding to avoid turning it into another Uganda shillings during the regime of late Field Marshall Idi Amin Dada as he is determined to set example with one or two MFBs, to serve as a deterrence to others competing with the traditional Banks in wholesale Banking and Foreign Exchange transactions.
It is not surprising why the Monetary Regulatory Authority has continued’’ to monitor developments in the MFBs in the nation’s financial sector to ensure they comply with the new policy. The Bank may have sent a message to the MFBs, that it will not hesitate to apply Regulatory sanctions for breaches of the extant regulations’ of its operating guidelines’. The sanctions according to informed sources include ‘’the revocation of the operating license of the MFB, operator, which the Bank had said is in line with section 19of the extant Guidelines .
Despite coming hard on the BDCs and MFBs, over the sale of Forex, the naira has not appreciated against the dollar in the last couple of weeks. Osita Nwanisobi, CBN, acting Director, Corporate Communications had attributed to the continuous flagrant abuse of the legal tender by hurling wads of n naira notes in the air and stamping on the currency at social functions. He noted that’’ there have also been cases where mishandle the naira, deface it, hawk the currency in parties and reject the currency in some instances’’, which is not good enough for the economy.
He believes that the only way the CBN ban on the sale of Forex to BDCs or stopping the MFBs , from engaging in the Sale of Forex would impact positively on the naira in the foreign Exchange Market is for Nigerians ‘’to handle the naira, which is the country’s legal tender and symbol of national pride with care’’, like the US dollar , EURO and the British Pounds.
This may have informed why the CBN, has warned Nigerians at social functions , to desist from disrespecting the naira or risk being arrested by law enforcement Agencies personnel.