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CBN heads for another row with NASS over use of foreign currencies for local transactions

By on February 23, 2013

Central Bank of Nigeria (CBN) may be heading for another acrimonious session with the National Assembly and perhaps some civil society groups that would be interested in the issue of the apex bank enforcing the ban on foreign currencies for local transactions.

Nigeria is perhaps one of the countries in the African continent where foreign currencies for local transactions are not prohibited. In a tiny nation like Qatar, transactions with foreign currencies are not encouraged; hence bureaux de change line up in their malls for easy conversion of ‘hard’ currencies to local ones prior to any shopping experience.

In that country, you will be promptly referred to any of those points before you are allowed access to the shops and transaction centres.

However, in Nigeria, particularly in the Federal Capital, Abuja, and a commercial centre like Lagos, foreign currencies are used more regularly than the naira and kobo. This trend however is common among the upwardly mobile individuals in business and politics.

To ensure that this trend is put under check, the House of Representatives recently asked the CBN to ban the use of foreign currencies in local and domestic transactions in the country.

The House’s resolution was sequel to a motion moved by Hon. Nadu Karibo, titled, “Need To Ban The Use of Foreign Currencies in Domestic Transactions in Nigeria.”

Early this week, the CBN rejected the resolution of the House urging it to ban the use of the United States dollar and other foreign currencies for domestic transactions.

The apex bank said it could not do so because it did not have the capacity to impose the ban, as it was not a law enforcement agency.

CBN Deputy Governor (Operations), Tunde Lemo, responding to media enquiries on the House’s resolution, pointed out that the N5,000 bank note which the apex bank proposed last year, but was suspended due to the outcry of some Nigerians, was meant to raise confidence in the naira as well as address challenges posed by the dollarisation of the economy.

The House during plenary last week had passed a resolution urging the CBN to ban the use of foreign currencies for local transactions.

In Karibo’s motion which preceded the resolution, the lawmaker had said the dollar was fast displacing the naira as a means of exchange in Nigeria.

He explained that major hotels, elite schools and supermarkets now prefer to be paid in dollars for their services rather than in the naira.

The trend of using foreign currencies instead of local currencies for the payment of domestic transactions, he added, was weakening the naira and should be stopped before the local currency loses its value.

However stakeholders have expressed shock over CBN’s confession that it lacks the capacity to enforce the ban proposed by the lawmakers. Meanwhile, the CBN in the past has ousted some banks’ chiefs and handed them over to law enforcement agencies for prosecution.

The Sanusi Lamido Sanusi-led apex bank has also engaged in some controversial policy decisions which many Nigerians believe were outside the scope of the bank. The cashless transaction enforcement by the bank, non-spreading of the naira which the bank used the police to enforce, closure of out-station ATMs and the inability to keep the excess crude account in dollar were some of them.

[Daily Independent]

One Comment

  1. harry

    February 24, 2013 at 12:36 pm

    Are we all daft? How can cbn control which currency a buyer and seller agrees to trade on..It can only effectively control banking operations and services..
    I think lawmaker is shortsighted and obviously knocking at the wrong door..