- Can the Central Bank maintain the new dollars fixed price regime?
The Central Bank of Nigeria (CBN) seems to be getting its dollar management right all of a sudden. Though naira to dollar exchange rate has not dropped significantly, the pressure and anxiety often associated with sourcing the U.S currency seem to be waning considerably.
First, the monetary authorities are concluding plans to adopt the Chinese Yuan as reserve currency for trades with China. This of course has the immediate effect of reducing the pressure on the U.S dollar as Nigeria’s most significant currency of international trade.
While the Yuan deal is being fine-tuned for commencement, the CBN has come up with another seeming ingenious process of managing Nigeria’s age-old dollar dilemma.
Mr. Godwin Emefiele, the CBN governor, announced what may yet bring a lasting impact to bear on forex management in Nigeria, especially as it concerns the dollar.
The CBN has pegged the rate for travel allowance at N360.00 to $1.00 and directed all banks to sell accordingly. As a symbolic gesture, a team led by Mr. Emefiele had visited three major bank branches in Abuja to monitor compliance to the circular issued penultimate weekend.
According to the directive, no bank must sell for a kobo more than N360 to a dollar to travellers. The traveller, upon presenting visa and flight ticket must be availed with dollars immediately, irrespective of whether the person is a bank customer or not.
Addressing the staff of one of the banks, Emefiele drove home the point of the new policy thus: “During the weekend, there was a release from the Central Bank of Nigeria that all banks are mandated to sell foreign exchange to anybody that walks into their bank. It is the bank’s primary responsibility to provide foreign currencies for travellers out of the country.
“So all that you need is just your passport, visa and travelling ticket. You are not expected as a customer or non-customer to deposit your documents and go away; you are expected to be attended to over the counter.”
He also warned that no bank must turn back any customer who has met the basic requirements. The CBN had given all banks enough foreign exchange to meet the genuine demands of all travellers.
Emefiele said the banks were stocked with foreign currency so Nigerians should never have any problem accessing forex; every bank ought to have a separate cubicle marked BTA or Bureau De Change. The banks are entitled to a margin and it has been built into the rate of N360.00.
Considering the seeming ease of this regime and apparent workability, one would wonder why nobody thought of it all this while. As awareness increases by the day, it would be difficult for any bank to manipulate the forex market anymore for quick gains or unwarranted rent.
Hitherto, banks would flout the margin rule set by the CBN and sell at any rate they like. They would create scarcity, and take huge rent by selling to the highest bidder or to the black or parallel market. It was a bazaar in which banks neglected banking practices while making huge profits from merely trading in foreign currencies.
There are however, some misgivings concerning availability and supply of adequate forex. Would CBN always have enough to meet demand all the time? Any scarcity would damage the integrity of the new regime. Second, what is the penalty for flouting this directive? For a long time, as we fear may happen this time too, the penalty was a mere token compared to the gains of breaching the directive.
There must be channels for immediate feedback so that customers can report real-time, any hanky-panky they experience. Indeed, let the customer be the whistle blower of sort. It is a laudable initiative by the CBN which requires vigilance and tenacity of will for it to succeed.
If this forex regime is sustained for some time, the dollar rate would continue to decline while naira would enjoy steady appreciation.
