The Central Bank of Nigeria has warned to penalize commercial banks that sell foreign currency without authorization.
This came after reports that deposit money banks are diverting most of their foreign currency to the unofficial foreign exchange market rather than selling to their customers, which caused the naira to plummet to over N950 to $1 in the parallel market as FX scarcity deepens.
The acting CBN Governor, Folashodun Shonubi, said this while giving a lecture in Abuja on “Diaspora Remittances and Nigerian Economic Development”.
Shonubi emphasized the necessity of taking stringent measures to limit illicit remittances and channel them via appropriate means to maximize economic growth.
At the occasion, Shonubi announced the creation of a commission that would make unannounced trips to banks suspected of forcibly selling dollars.
He declared, “We need to hold commercial banks accountable for engaging in such malpractices.”
The acting governor also highlighted the drawbacks of the current remittance system, estimating that it costs around 8–9% of every $100 to send money from the diaspora to Sub-Saharan Africa, which is the highest cost in the world.
However, he pointed out that Nigeria received remittances totaling around $16.7 billion, the vast bulk of which was sent outside the country’s official foreign exchange market.
We are making great efforts to persuade people to invest in the formal sector rather than the increasingly difficult-to-manage informal channels.
The head of the CBN remarked that despite efforts to encourage people to participate in formal market transactions by offering a N5 rebate through its Naira 4 Dollar programme, the policy was still ineffective, leading to the N5 rebate’s discontinuation.
He acknowledged the value of incentives in luring consumers to the legal market, though.
He said, “Since it is the only market we acknowledge, we will rename the foreign exchange market, formerly known as the I & E market, to the Nigerian Foreign Exchange Market.”
The Commandant of the National Institute of Security Studies, Ayodele Adeleke, emphasized the value of the lecture series in raising national security awareness. He claimed that one of the strategies used over the 10-month course to advertise and give the program a focal point was the series.
In a similar incident, Shonubi blamed the divergence of remittances from the diaspora to illicit markets like the parallel for the collapse of the naira against the dollar and its failure to control the foreign exchange market.
He clarified that a lot of dollar-denominated remittances from the diaspora arrive in Nigeria but are not legally recorded because they are intended for the black market.
He also mentioned the issue with the illegal or parallel market is that because it is not regulated, it becomes an easy place to have criminal activities.