The ongoing attempt by the Nigerian Law Reform Commission to criminalise the possession of foreign currency is retrogressive and ill-conceived. In seeking to help the government tackle the acute forex crisis, the agency’s intervention may well serve to compound a worsening conundrum. A country in deep economic crisis like Nigeria needs well-articulated policy measures and coordination among all stakeholders, not panicky legislation.
The NLRC’s proposed Foreign Exchange (Monitoring and Miscellaneous Provisions) Amendment Bill 2016 seeks to amend the existing eponymous Act of 2004. While its proposals recommend several amendments to the extant law, it is the recommendation to insert a new section 9A titled, Prohibition of Possession of Foreign Currency that has become most contentious. Its wording is scary: “The possession of foreign currency by any person without depositing same in a domiciliary account within 30 days of its acquisition constitutes an offence liable on conviction to two years’ imprisonment or to a fine of 20 per cent of the foreign currency involved.” This evokes the dark days of iron-fisted military rule.
This appears to be a jumpy response to a crisis that requires more creative thinking and a well-thought-out plan. To be fair to the NLRC, such recommendations are within its purview. Its enabling law charges it with reviewing all federal laws where necessary “with a view to their systematic and progressive development and in consonance with the prevailing norms of the Nigerian society…” Despite its enshrined independence, however, the agency should have engaged all other stakeholders in matters as critical to national survival as forex in an era that has moved from recession to stagflation, as the Central Bank of Nigeria Governor, Godwin Emefiele, warned ominously last Friday.
Critically, the CBN has dissociated itself from the recommendation, with Emefiele going further to say the regulator would stoutly oppose it. The strident opposition of the Senate further confirms lack of stakeholder consultation and buy-in.
To say the least, the recommendation is primitive and at odds with the ongoing measures being taken by the CBN to make scarce forex available to critical sectors of the economy. The globalised era has demolished such restrictive barriers as criminalising possession of small amounts of forex save for hermit nations like North Korea. According to the World Bank, remittances by the Nigerian diaspora hit $21 billion in 2015, the largest in Africa and the world’s fifth highest. Much of this comes in trickles to family members and friends from Nigerians living abroad, many of whom do not even have regular bank accounts, much less domiciliary accounts. Nigerians send money home to parents, elder relatives and other dependents, including students. The Nigerian Inter-Bank Settlement System said there were only 59 million bank accounts in the country in 2015, featuring multiple accounts by only about 33 million adults, leaving almost 60 million Nigerian adults without formal bank accounts, according to the NGO, Enhancing Financial Innovation and Access. In a free economy, individuals should not be restricted to lawful access to funds. Under the CBN’s new rules, bureaux de change operators are allowed to source forex from every legal avenue.
Lawmakers should expunge this obnoxious provision once they receive the draft. As Senate spokesman, Aliyu Abdullahi, observes, the proposal threatens to undermine ongoing reforms and further cripple businesses. Today, businesses desperate to keep going are encouraged to source their forex needs anywhere: a law that would drive foreign currency into the black market is counterproductive. The proposal harks back to the archaic command economy epoch that expired in the 1980s where Third World governments controlled the commanding heights of the economy with disastrous results.
President Muhammadu Buhari should not allow overzealous officials to transport him back to the past. He should rein in practices such as the indiscriminate raiding of BDCs undertaken recently by the State Security Service, ostensibly to force down forex rates. We are not under the jackboot of a dictatorial regime and there are better ways to curb malpractices in the forex market than ineffectual brute force. The ideal Nigerians aspire for is a stable democracy and free market economy. Government can and should regulate only prices of forex that it sells: it cannot regulate prices of what it does not sell except through fiscal measures such as taxes and tariff.
Under existing anti-money laundering and anti-terrorism laws and regulations, the amounts of forex individuals and corporate bodies can hold are clearly spelt out and are reviewable when necessary. Legislating how long one can hold cash lower than the set maximum is intrusive, an assault on the right to choose and own assets. When in a recession, you ease, not restrict, access to forex for businesses.
This issue reminds Nigerians once more of the clear absence of an emergency recovery plan fashioned at the highest level to take the country out of stagflation – a dangerous mix of negative growth, high unemployment and high inflation. The lessons from successful emerging economies instruct making policies that target exports, job creation and small businesses as the preeminent objectives of all economic policies. Buhari should involve all stakeholders – the private sector, professional groups, labour, farmers and trade groups – to fashion and buy into a realistic road map to rejuvenate the economy. This lack of a comprehensive plan and inclusion is taking us nowhere. Even next year’s spending plan is threatened by unremitting economic sabotage in the oil producing Niger Delta region.
We should, however, not throw out the baby with the bath water. The proposed bill makes some useful suggestions, including spelling out specific objectives of the law. The National Assembly, the CBN, the Finance Ministry and OPS should take a critical look and adopt what is best for Nigeria and the economy. But they should swiftly reject the obnoxious section 9A.
