Amidst the declining value of the Naira, the Central bank of Nigeria, CBN, on Thursday introduce more sweeping reforms in its quest to stabilize the national currency as well as the foreign exchange market.
The magazine reports that CBN issued some policies recently as it struggles to save the naira against other world major currencies.
For instance, International Money Transfer Operators, IMTOs, last week notified their customers that they would no longer pay foreign remittances in dollar, in line with CBN directive to now pay such in naira.
“it’s no longer possible for any money transfer to be paid out in USD in Nigeria. But please don’t worry. You can still enjoy the same quick, safe and affordable WorldRemit service to Nigeria by sending money in Naira instead. If you have any questions or concerns, our dedicated support team is always here to help,” said Worldremit, one of the IMTOs in a notice to customers.
At least, three circulars were issued yesterday by the apex bank, described by experts as a desperate move to tighten the noose on the nation’s foreign exchange market.
According to the circulars which came simultaneously from the CBN’s Director of Trade and exchange, Dr. Hassan Mahmud, the CBN has now made it impossible for International Oil Companies, IOCs to repatriate 100 percent foreign exchange proceed from the country. The apex bank has now made it possible for the IOCs to repatriate their forex in two tranches of 50 percent in the spate of three months.
Apart from this, the CBN said it will no longer allow cash for Business Travel Allowance, BTA, and Personal Travel Allowance, PTA, as such allowances are to be issued in cards.
The CBN directed commercial banks in the country to comply with the new forex Order, saying they are part of the Yemi Cardoso-led apex bank effort to save the naira from further declining.
The naira has experienced its worse performance in the last few weeks after exchanging for more than N1,500 to the American dollar.
The CBN took the action after the World Bank described naira as the worst performing currency in Africa.
The Bretton wood US based organization had classified the Nigerian currency among those of other 12 other countries which performed woefully in 2023
Other countries whose currency were listed include South Sudan, Burundi , the Democratic Republic of Congo , Kenya , Zambia , Ghana, and Rwanda, amongst others.
“So far this year, the Nigerian naira and the Angolan kwanza are among the worst performing currencies in the region: these currencies have posted a year-to-date depreciation of nearly 40 per cent,” the bank said in a report
“The weakening of the naira was triggered by the central bank’s decision to remove trading restrictions on the official market. “
In the first circular issued by the CBN, it said the action was meant to stop “cash pooling’ by the IOCs which according to the apex bank has impacted negatively on liquidity in the local foreign exchange market.
Such cash, the CBN said are usually pooled by the IOCs to fund their off shore parent companies, saying “it has become necessary to take measures to address this trend.”
Part of the circular read: “In line with the ongoing reforms in the foreign exchange market, it has become necessary to take measures to address this trend, consequently, the CBN hereby directs as follows:
*Banks are allowed to pool cash on behalf of IOCs, subject to a maximum of 50 per cent of the repatriated export proceeds in the first instance;
*The balance may be repatriated after 90 days from the date of inflow of export proceeds.”
Speaking on the restriction placed on IOCs by the CBN, Kenvin Ekhalufoh, the chief executive officer of Star Advisory Limited said on Thursday that the apex bank took the right decision.
According to him, other countries such as China, Canada had taken similar measure in the past to stop the outflows of forex from their countries.
He said: ‘It behooves on the CBN to stop the pooling of forex from the country. You need to slow down the movement of forex from the country due to the shortage in forex.
“Nigeria is not the only country doing this. Canada also dealt with the issue of forex pooling. If unchecked it has negative effect on the economy.”
Concerning the BTA, the CBN stated in the circular referenced: TED/FEB/PUB/FPC/001/006 and titled, “Allowable Channels for payout of Personal Travel Allowance and Business Travel Allowance,” that it took the decision to ensure transparency and genuineness of travelers seeking to obtain BTA and PTA.
The allowance, CBN stated in the circular will now be paid by banks through various electronic channels.
The Circular read in part :“Memorandum 8 of the Foreign Exchange manual and the circular with reference FMD/DIR/CIR/GEN/08/003 dated February 20, 2017, stipulate the eligibility criteria for accessing Personal and Business Travel, allowances (PTA/BTA),” CBN said.
“In line with the Bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices, All Authorized Dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards. For the avoidance of doubt, payment of PTA/BTA by cash is no longer permitted. Authorized Dealers and the general public are hereby to note and comply accordingly.”
