Senate Vows to Reject Proposal to Punish People for Holding FX

senateNigerian Senate
  • Senate Vows to Reject Proposal to Punish People for Holding FX

The Senate has expressed shock at a recommendation by the Nigerian Law Reform Commission for a review of the Foreign Exchange Act in order to empower the Central Bank of Nigeria (CBN) to jail people for up to two years or fine them 20 per cent of the amount of the foreign currency in their possession for more than 30 days.

The Senate, in a statement monday in Abuja by its spokesperson, Senator Aliyu Sabi Abdullahi, stated that with its focus on boosting investors’ confidence in the nation’s economy, such move as proposed by the commission that would deter investors from making free entry and free exit from the economy would be rejected by its members.

“The measure is disruptive and counter-productive, threatening to undermine many of the reform efforts already underway in the legislature and by government ministries intended to boost investors’ confidence.

“The Senate would never pass such a punitive and regressive proposal. Overall, some of the commission’s recommendations have 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.

“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,” the Senate stated.

It said it would continue to work with the executive to halt the worsening recession and return to economic growth.

A draft published on the website of the commission revealed that the government is seeking to amend the Foreign Exchange Act.

According to the draft, the central bank will gain more power to control in and outflow of foreign currencies, especially the dollar in the wake of a foreign currency crisis.

It also proposes up to a two-year jail term or a fine of up to 20 per cent of the amount being held for up to 30 days.

In addition to the proposed amendment, in recent weeks, there has been a major clampdown on dealers of forex in the black market.

Last week, officials of Department of State Services (DSS) arrested hawkers of foreign currency in Kano and Anambra. Prior to that, DSS officials raided and arrested currency dealers in Lagos and Abuja.

The proposed changes by the commission are intended to help control capital flows and prevent forex from being taken out of the country.

The proposed changes that were posted on the commission’s website, state that “the amendments are necessary for effective monitoring and control, and to ensure probity in foreign-exchange transactions in Nigeria”, as the existing law on foreign exchange is currently “narrow in scope”.

Last September, the Senate spearheaded an economic agenda to pass key reform legislations to promote economic growth through greater public sector participation, boost investor confidence and create jobs.

Also in June, the CBN was cheered for loosening its control over the exchange rate policy in a bid to encourage investors to return to Nigeria and prevent capital flight.

Hopes were high after the Nigerian government finally allowed the naira to float, as recommended by domestic and international investment advisors.

Currently, however, the markets do not reflect a loosening of CBN control over the forex market, leading to the emergence of multiple exchange rates, the Senate said in the statement.

However, the central bank said monday that it had nothing to do with “rumours” of a planned amendment to the Foreign-Exchange Act to allow for imprisonment of anyone who holds foreign currencies, particularly dollars for more than 30 days.

CBN, in a statement by its acting Director, Corporate Communications, Isaac Okoroafor, said in line with its mandate, it was committed to safeguarding the international value of the country’s legal tender currency, the naira.

The central bank also expressed ignorance of the proposed clause recommending a jail term for or a fine of 20 per cent of the amount for any holder of foreign exchange in cash.

Okoroafor said: “To the best of my knowledge, the Central Bank of Nigeria has not proposed any bill seeking to arrest and jail persons holding foreign exchange for more than 30 days.”

The CBN further denied suggestions that it was planning to confiscate funds in domiciliary accounts of individuals, maintaining that any such claim was false.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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