Halting foreign exchange infractions – The Sun

The ongoing probe of some companies over foreign exchange (FX) infractions by the Central Bank of Nigeria (CBN) is commendable. The affected companies, put at over 100, cut across various sectors of the economy, including healthcare, food manufacturing, agriculture, oil and gas, energy, financial services and hospitality industry, among others. The investigation is reported to be the outcome of a preliminary review which raised suspicion of alleged infractions and contravention of extant forex laws, rules and regulations of the companies under probe. The investigation, which began in September, is said to be the biggest forex probe in recent years. The apex bank is said to be worried at the level of the infractions and the companies involved. The bank is dissatisfied that the affected companies were patronising the “black markets” for their forex transactions instead of the banks.

In August, the CBN secured a court order freezing the accounts of the companies alleged to be behind foreign exchange volatility. It had alleged that the companies were engaged in the importation of some items banned from official forex as well as manipulation of the foreign exchange market. According to the CBN, the affected companies were the cause of the current FX volatility with its attendant negative impact on the economy.

The apex regulator stated that in view of the heightened security situation in the country, the resort to the black market by formal sector operators might be a conduit for illegal transactions, including transmitting funds to terrorist groups, money laundering activities, under-declaration and shortchanging of extant government rules and policies.

The companies being investigated  are grouped into two categories: those with specific forex accounts, and others with sundry accounts but specialise in buying forex from certain unauthorised sources without passing  through the legitimate channels, thereby avoiding documentation and as a result, overheating the system. We urge that the probe should be thorough, and companies found to have violated the rules and extant provisions establishing forex transactions should be severely punished, and possibly blacklisted from participating in the forex market for a long period of time, including hefty fine to serve as deterrent.

Forex infractions amount to economic sabotage and should not be tolerated. With a slump in global oil prices and the COVID-19 pandemic, which has upended world economy, the CBN has been struggling to balance its macroeconomic and developmental mandate with its regulatory role of maintaining stability in the financial system. Amid forex pressure, the CBN has battled global and domestic headwinds to ward off the devaluation of the naira.

Arising from these challenges and the need to keep the economy afloat, the apex bank has created the Investors and Exporters (I &E) window as an official avenue to attend to forex requirements of the formal sector operators. In order to meet this demand, the CBN has continued to inject so much foreign currencies in the forex market. As at last February, the CBN injected $210 million into the interbank forex market to boost liquidity in the sector. Of the amount, authorised dealers in the market received $100milion, while the Small and Medium Enterprises (SMEs) received $55million.

Those seeking forex for invisibles, such as tuition fees, medical and basic travel allowance received $55million.  In May, $100million was injected into the forex market to ensure stability and availability to meet customers’ demand. A week ago, the CBN pumped in $50 million into the FX market to test demand and supply, but more importantly, the price of Naira against the dollar. This the apex bank does by selling forex from its reserve to stabilise the exchange rate despite poor earnings due to poor crude oil price.

Therefore, to ensure that Nigeria’s forex resources are prudently managed and used for the importation of priority goods, it is important that unauthorised FX dealers are reined in. In that regard, we support the request by the CBN for accounts (both Naira and foreign currencies) of the suspected companies that may have contravened the forex market rules, to be scrutinised. It is good that the apex bank is investigating the avenues through which the affected companies sourced forex which they eventually sold to other parties, who buy and repatriate the funds. This is the right time to sanitise the forex market and stop all underhand dealings in foreign exchange trading.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

x

Check Also

High rate of narcotics abuse is worrying – Punch

It is the new normal for Nigeria to feature prominently in the worst global indices. The country has proved it once again when it ranked highest in drug use prevalence rate in the world. Nigeria’s drug problem is truly staggering, and still