It is no more news that, in seeking to help the government tackle the acute forex crisis, the Nigerian Law Reform Commission has proposed an amendment to the Foreign-Exchange Act to enable the imprisonment of anyone who holds foreign currencies, especially the dollar, for more than 30 days.
According to the draft amendment of the Foreign Exchange Act, anybody holding dollars in cash for more than 30 days risk a jail term for as long as two years or a fine of 20 per cent of the amount. Regulators should also be able to prevent money being repatriated “in accordance with the terms and conditions as may be prescribed by the central bank from time to time,” the draft states.
The draft bill further states that, the existing law is “narrow in scope and prohibits the seizure, forfeiture or expropriation of imported money by the government without providing for exceptions,” it adds. Thus the amendments are necessary “for effective monitoring and control, and to ensure probity in foreign exchange transactions in Nigeria.”
This was followed by the arrest of some Bureau de Change (BDC) and black market forex dealers by the Department of State Security officials for exchanging the naira at a rate weaker than 400 per dollar, compared with the existing street rate of around 460. The security raid on the black market dealers and Bureau de Change was conducted against the backdrop of their purportedly role in the downward spiral of the naira against the US dollar.
The BDC agents were left lamenting the difficulty in buying and selling dollar these days with the involvement of security personnel. According to an agent who doesn’t want his name in print, “it is difficult to buy or sell forex these days since security men started arresting dealers. Where will you see dollars to buy at N390 and then sell at N400? It is almost impossible. What I’m selling is the dollars I bought earlier from the market and I’m even rationing it to keep myself busy. If I sell all, I don’t know where to get supplies from. Most of our members have gone underground.
“So, the whole market is paralysed. Nobody is buying; nobody is selling because you don’t know who you may be transacting with. If anybody asks for dollars, you tell them you don’t have. They want people to be hoarding dollars, and this will strengthen the roadside currency hawkers because when people cannot buy from BDCs, they will be forced to patronise black market operators,” he said.
In trying to justify the action of the DSS, the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said those arrested were illegal dealers who have swarmed over the business across the country. According to Gwadabe, there are over a million illegal or non-licensed BDCs across the country while the licensed ones are about 3,000 in number. In terms of ratio, you can see that they far outnumbered us. Gwadabe explained that before the crackdown, security agents held meetings with the BDCs with a view to making them reform their operations and stop hawking forex on the streets but the non-licensed dealers would not listen.
According to the Central Bank of Nigeria (CBN) Governor, Godwin Emefele, those arrested were forex hoarders whose unwholesome practices have kept the value of the hard currency high and scarce, to the detriment of Nigerians. As a matter of fact, the CBN boss urged Nigeria’s security agents to sustain the tempo to ensure illegal parallel market operators are run out of town. Emefele said, “the foreign exchange regulation in Nigeria today forbids trafficking in currency on the streets. We should underscore that point. You cannot stand on the street and traffic in forex. What we know is that security agencies have the right to enforce the law, which says you cannot traffic in forex. You’re supposed to be in your offices to conduct your businesses. So, you will have to adhere to that.
“If you don’t adhere to that, the security agencies will arrest you. So, on whether it’ll drive black marketers away and make dollars more scarce, let me say that black market in itself is an illegal business. So, we don’t consider, in our own analysis, people who want to go underground to conduct illegitimate business. If you are conducting a legitimate business, you should be free to operate openly; not under the table,” he explained.
Despite seemingly supporting the arrest of alleged dollar hoarders, the apex Bank of Nigeria has distanced itself from being a party to a legislation that seeks to bar citizens from holding foreign currencies for more than 30 days. The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, denied knowledge of the proposed recommendation that a jail term of two years for any holder of foreign exchange in cash or a fine of 20 per cent of the amount. Mr Okorokafor stressed that the CBN apex bank was committed to safeguarding the international value of the country’s legal tender in line with its mandate.
Similarly, the upper chamber of the National Assembly has rejected the recommendation by the Nigerian Law Reform Commission on the review of the Nigerian Foreign Exchange Act, which will empower the Central Bank of Nigeria to jail people for up to two years or fine them for 20 per cent of the amount of the foreign currency held in their possession for more than 30 days. The Senate, in a statement signed by the Chairman, Committee on Media and Public Affairs, Senator Sabi Abdullahi, stated that with its focus on boosting investors’ confidence in Nigeria’s economy, such move, as proposed by the NLRC, which would prevent investors from making free entry and free exit from the market, would suffer outright rejection by the senators.
The senate lamented that measure is disruptive and counterproductive and it may undermine many of the reform efforts already underway in the legislature and by government ministries, intended to boost investor confidence. According to the statement from the senate, “he Senate would never pass such a punitive and regressive proposal. Overall, some of the commission’s recommendation has many sound attributes and could help Nigeria’s investment climate.
We believe the CBN should have the authority to regulate the forex market and determine the exchange rate policy, as already enshrined in its enabling Act. The senate further advised that, “a market-oriented exchange rate policy is the best recipe for guiding the operations of the foreign exchange market. This will ensure the supremacy of market mechanisms in efficiently allocating the scarce forex resources.”
According to a renowned professor of political economy and the Founder, Center for Leadership Values (CLV), Prof Pat Utomi, price control measures have never worked in any system thus advising government to ensure availability of foreign exchange through investment inflow and exports of goods and services.
According to Utomi, the government has a responsibility to ensure that laws made by it are strictly adhered to thus the CBN having made forex available to Bureau De Change operators for onward sale to members of the public, has the moral justification to ensure that the band rate fixed is adhered to by the operators. He explained that it is in human nature to want to profiteer from every situation arising from scarcity, insisting that only discipline and strict enforcement of law and order could salvage the situation. According to him, the continued raid on the operators may not bring about the desired result because it is not a sustainable approach and may not stand the test of time because it defies the basic rule of theoretical economics.