Human rights activist lawyer, Mr. Femi Falana (SAN), has dragged the Central Bank of Nigeria (CBN) to court over forex liberalisation.
In the suit filed before the Federal High Court, Abuja, the human rights lawyer asked court to stop CBN from allowing speculators “market forces” to determine the exchange rate of the Nigerian naira to dollar.
The senior advocate argued that while the CBN claimed it had fixed the exchange rate at N199 to a dollar, and President Muhammadu Buhari’s persistent vow never to devalue the naira, the apex bank “had allowed market forces to increase the exchange rate to over N400 to a dollar.”
The lawyer said the apex bank has dollarised the economy to the extent that the US dollar is gradually becoming legal tender as school fees, payments and others are now being charged in dollars, and without enough dollar to service the economy this create economic constraints in the country and allow certain people to profit from the situation at the detriment of the nation’s economy.
According to Falana, “The monetary policy of the defendant (the CBN) has led to a situation whereby too much naira chase few dollars thereby making the naira weaker in relation to the dollar and instigating an adverse multiplier effect.”
“The monetary policy of the defendant has also led to increasing costs, rapidly rising inflation and interest rates, closure of factories and the attendant high level of unemployment.”
“Whether the monetary policy of the defendant which allows market forces to fix and determine the exchange rate of the naira is not a violation of section 16 of the Central Bank of Nigeria (Establishment) Act 2007 and section 16 of the 1999 Constitution as amended,” he contended.
CBN Amends Forex Receipt as Naira Hits Record Low
In a bid to simplify and finally liberalize the receipt of diaspora remittances, the Central Bank of Nigeria (CBN) has amended its receipt procedures to allow beneficiaries of diaspora remittances receive such inflows in foreign currency (US Dollars).
The apex bank stated in a circular signed by Dr. O.S. Nnaji, Director Trade and Exchange Department, CBN.
In the circular, recipients of remittances can now receive funds in either foreign currency cash (US Dollars) or into their ordinary domiciliary account.
While the International Money Transfer Operators (IMTOs) will henceforth receive diaspora remittances in foreign currency through the designated bank of their choice.
The CBN plans to ease forex scarcity, speed up the recovery process and checkmate the activities of speculators and hoarders at the black by injecting diaspora remittances estimated at about $20 billion per year into the real economy.
This is expected to not just improve business activities but also moderate foreign exchange rate from the current N500/US$ and move the central bank a step closer to unifying the nation’s foreign exchange rates.
The circular partly reads “In an effort to liberalize, simplify and improve the receipt and administration of diaspora remittances into Nigeria, the Central Bank of Nigeria (CBN) wishes to announce as follows;
“Beneficiaries of Diaspora Remittances through International Money Transfer Operators (IMTOs) shall henceforth receive such inflows in foreign currency (US Dollars) or into their ordinary domiciliary account. Such recipients of remittances may have the option of receiving these funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.”
Naira Devaluation Pushed Exchange Rate to N500/US$ at Black Market
Naira to United States Dollar exchange rate plunged to N500 on Monday after the Central Bank of Nigeria (CBN) devalued the Naira by N6 on Friday amid growing scarcity.
At the current rate, the local currency has lost N140 per US dollar when compared with N360 it was sold in the same month of 2019 and N5 compared to N495 it exchanged on Friday.
In an effort to ease pressure on the nation’s foreign reserves and unify foreign exchange rates in line with the International Monetary Fund and the World Bank’s requirement for loans, the CBN devalued the official exchange rate by N6 from N379/US$ to N385/US$ and directed bureau de change operators to sell at N392/US$, up from N386/US$.
However, with importers and businesses looking to meet the usual high demand for goods in December pushing demand for the United States dollar off the roof, Naira’s value has continued to plummet despite efforts by the CBN to prop up its value.
Against the British Pound, the Naira declined to N650, down from N620 it exchanged last week. This depreciation continues against the Euro common currency as the local currency declined to N585.
Lack of liquidity due to the weak foreign reserves, low oil prices and weak demand for the commodity amid production cuts by OPEC and allies is hurting CBN’s ability to effectively intervene at the nation’s foreign exchange markets.
The apex bank usually sells forex to dealers to ease scarcity and facilitate trades. However, lack of foreign revenue generation has forced the CBN to reduce its weekly forex sales to $10,000 per bureau de change operator despite reopening of the economy pushing demand for forex further up.
Again CBN Devalues Naira by N6 Ahead of World Bank’s $1.5bn Loan Request
The Central Bank of Nigeria (CBN) has once again devalued the Nigerian Naira by N6 to the United States Dollar, making it the third time the apex bank will adjust the Naira exchange rate this year.
The devaluation brings the CBN closer to actualising foreign exchange unification demanded by the International Monetary Fund (IMF) in April before the $3.4 billion loan was approved.
This same condition was enforced by the World Bank as a prerequisite for approval of $1.5 billion loan request submitted by the Federal Government. The loan the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said she was positive it would be approved by the multilateral institution in the next meeting given that the Federal Government has met all the conditions for the said loan.
24 hours later, the apex bank devalued the Naira official rate by N6 from N379/US$ to N385/US$. While the International Money Transfer Service Operators (IMTOs), all authorised dealers, bureau de change operators and service providers were asked to add N6 across all rates.
The rate for IMTOs against the US dollar has now moved from N382 to N388. Meaning banks will now sell dollar to the CBN at N389, up from the previous N383 to us dollar.
Again, the Central Bank sale of dollar to the bureau de change operators was pegged at N390 to dollar, against the old N384 to US dollar.
The apex bank, therefore, directed the BDCs to sell at not more than N392 per dollar to end-users. The old rate was N386 to a US dollar.
The CBN circlar reads in part, “Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.
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