By Emmanuel Nduka
On Saturday, February 3, 2024, reports by local media in Nigeria suggested that the Nigerian Government is considering a conversion of foreign currencies held in domiciliary accounts of Nigerians to naira. The move according to PUNCH quoting unofficial sources, was meant to stabilize the naira against the dollar.
Heritage Times HT recalls that last week, the Nigerian naira plunged to an all-time low of N1,348 on the official market, and between N1, 465 to N1,500 on the black market against the US dollar. This was the naira’s biggest fall ever against the dollar in the country’s history.
Saturday PUNCH in its report claimed that top Presidency sources affirmed that the problem of forex scarcity and the naira fall was an elite issue, and that the Government would not fold its arms and continue to watch some individuals hoard foreign currencies at the expense of the naira.
“The problem of dollar scarcity is an elite problem. You will notice that this happens at the end and the beginning of a new month. That is when the exchange rate goes up. Invariably, that is when governors collect FAAC (Federal Account Allocation Committee) allocations. Whatever the connection, we don’t know.
“There is no country in the world where people open domiciliary accounts to keep dollars. It happens only in Nigeria. This must be addressed. This is not only a political issue, but it is also an economic issue that must be addressed. Genuine demands driven by economic activities can’t bring this huge pressure. By June, dollar demands are supposed to have gone down when Dangote Refinery must have started.
“Nobody should keep a domiciliary account if they do not have legitimate foreign currency earnings like salary or getting foreign exchange revenue, either as an individual or as a company. Even if you have foreign exchange inflow as a result of your work, immediately after the money lands in your account, the banks should automatically change it to the local currency and your local currency account will be credited with the equivalent value.
“In Nigeria today, there are over $30bn in domiciliary accounts of individuals. It is in the CBN account. The records are there. It is not right. These are issues we will have to deal with. In other countries, dollars are not meant to stay in peoples’ accounts,” PUNCH quoted its source as saying.
In a hurried reaction same day, the Central Bank of Nigeria (CBN) through its Acting Director of Corporate Communications, Sidi-Ali, Hakama, said the allegation as published by PUNCH “is absolutely false and aims to trigger panic in the foreign exchange market”, adding that “similar false narratives have been spread on the work of the CBN over the past few months” by “vested interests.”
The uncertainty surrounding the development has now put owners of domiciliary accounts in frenzy mode. Fears were further heightened on Thursday and Friday after some domiciliary account holders complained of being unable to access their funds. Those who have accessed their funds are pulling them out, and are advising others to follow suit.
However, if the conversion report is true and the CBN goes ahead with the plan, it can be assumed that Government may order the conversion of foreign currencies sitting idly in individuals’ and corporate organisations’ domiciliary accounts to naira at a rate to be determined by the CBN itself.
While some section of Nigerians have blamed Bureau de Change (BDC) operators for the forex imbroglio, others are baffled by the revelation of a $30 billion hard currency cache available in a country where it is presumed scarce. But of course these are personal monies of individuals.
Financial experts have posited that if the Government via the CBN forcibly convert the dollars held in domiciliary accounts by individuals, it would have succeeded in destroying the last remnants of the naira and the Nigerian economy by extension. It will trigger capital flight.
A disgruntled President of the BDC, Aminu Gwadebe, lamented a drop in sales, alleging that Nigerians had stopped buying dollars to hoard seemingly because of the CBN’s policy direction. “It used to be the rational behaviour, but there has been some relaxation in the demand pressures. Before, people were buying because of a lack of confidence in the CBN,” he told journalists.
Among many other practical approaches to ending the hoodoo, Nigeria must begin to look at its production possibility curve (PPC). For the local currency to regain its value, a country must be exporting goods, services, products. This will make for a fovourable balance of payment.
Educational and medical tourism must also be curbed. Infrastructure and quality of public institutions and healthcare can be improved upon to reduce pressure on the naira.
“It is only the rich who trade in dollars; where will a poor man get dollars to put in his account? These people know the business well. They follow the trends of the market even more than journalists. They come in their cars to buy $5,000 and then return in a few hours to sell it so that they can monitor the market. We also have those whose children school abroad as well as international travellers, who need dollars abroad,” Malami Ibrahim, a BDC operator in Abuja noted.