Recently, the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, drew the attention of Nigerians to the illegality of transacting businesses in the American dollar and other foreign currencies in Nigeria, instead of the naira, which is the nation’s legal tender. He said that the apex bank would be looking at areas of the economy in which businesses are making demands for payment in foreign currency with a view to stopping the practice.
Indeed, reports from across the country show that some landlords, schools, hotels and other service providers now denominate the costs of their goods and services in dollars instead of the naira. Although demanding dollars for business transactions is fast becoming a fad in Nigeria, the development is a subversion of Nigeria’s sovereignty and extant laws.
Section 15(1) and (2) of the CBN Act (Laws of the Federation of Nigeria) is unmistakably clear on this: Section 15(1) says that “the unit of currency in Nigeria shall be naira”. Section 15(2) adds that “subject to the provisions of section 47 of the Act,” every contract, sale, payment, bill, note, instrument and security for money and every transaction, dealing matter and anything whatsoever relating or involving the payment of, or the liability to pay any money shall be done in naira”.
It is unfortunate and, indeed, surprising that in spite of the clear provision of the law on the naira as the official legal tender in Nigeria, Nigerians and foreigners alike are in breach of it. It is unpatriotic for any person or organisation in Nigeria to demand payment for any good or service in dollars.
The increasing use of the dollar for business transactions is bad for the nation’s economy. It is already putting undue pressure on the nation’s foreign reserves, especially at this time that the price of crude oil, Nigeria’s key revenue earner, has dropped significantly in the international market. It crashed from over $100 per barrel a year ago to $56 last weekend.
We, therefore, welcome the move by the apex bank, but it should go beyond mere threats to concrete action to stem the trend. It should strictly enforce the provisions of the CBN Act in this regard. It, indeed, can be said that the use of the US dollar in business transactions in Nigeria is on the rise because the CBN has, several times in the past, warned Nigerians about its illegality, but did nothing serious to stop it.
Even though the ‘dollarization’ of our economy may be a direct response to the weak economy and the diminishing value of the naira against major currencies, it is unacceptable that key transactions in Nigeria should be denominated in foreign currency.
We believe that the CBN knows the steps to take to address this situation. These include far-reaching monetary and fiscal measures that can strengthen the value of the naira and restore confidence in both the domestic and international markets. Realistic short and long-term measures have become expedient to strengthen the value of the local currency.
It also rests on the incoming administration to initiate measures that will help restore confidence in the economy. Currently, the nation’s economy is underperforming, with so much pressure on the naira largely due to the decline in oil prices and politics, which has put a lot of pressure on the money in circulation.
It has become imperative that we prioritize the defence of the value of the naira so that it can play its proper role as the legal tender in the country.
