CBN, domiciliary account and the economy (2)
THE Nigerian Government and State Governments must be large customers for cash usage and disbursements. After all, US$9.6 million was found in an aeroplane in South Africa on a government mission. Who has access to huge amount of cash? Prima facie that would be the Federal and state governments and other agencies under them.
These are the people CBN could have talked to and stop them from continuing to put our country in jeopardy by putting large sums into vaults; now too small to carry the money. A politician received US$650,000 from a businessman who testified to giving that politician this money in cash? What has happened?
The last election saw an unprecedented flow of foreign currencies. Who brought them, who used them? Does the CBN not know this? There is little purpose for a man to go to a seashore and shout in the wind if he really has something to say and he knows who to say it to!! The vaults are not full. The circulation of large amount of foreign currency may affect the value of the Naira but that cannot be stopped merely by banning foreign bank notes. By the way, how much is this foreign bank notes slush? How much is in the banks? Most of the round tripping done in Nigeria, as the CBN well knows, is not done via bank notes but via transfers from international oil companies, embassies and other large international conglomerates by the Form M the CBN now wishes to impose. Form M cannot stop round tripping. The issue of Naira stabilization is a market problem which the CBN knows how to handle and has been doing so for a long time.
The use of form M, Al, etc is strict foreign exchange control mechanism to be imposed only at the most dire of economic problems: inability of the nation to meet its trade obligations. These measures will bring back the old nightmares of confirmed Letters of Credit (LC), then the unconfirmed LCs, etc. It took Nigeria more than a decade to get out of this quagmire and ended only when Nigerians could legally operate domiciliary accounts.
I think the CBN should ask the banks to talk to those large foreign notes depositors. Opening and operating a domiciliary account in the bank was itself not against the law. If the issue is to know the source of funds, then say; so but do not make up some nonsense merely because the U.S. has cracked the whip. The present CBN policy will start putting hundreds of thousands of Nigerians out of work.
Domiciliary accounts should continue to accept cash say up to $10,000 at a time. Larger amount could be accepted e.g. from duty free shops; other exception to the total ban – BTA returnees who did not spend all the money overseas; estacode receiving officers, diplomatic envoys etc.
I suspect that eventually domiciliary accounts will be subject to the interference of the West who assumes that all Nigerians are corrupt. This is a bit rich from the West who themselves over the years have benefited from moneys whose origin has been opaque; whole governments, and nations depended on deposits whose origin was unknown if not questionable, such countries as Switzerland, Virgin Islands, Jersey and Guernsey, Luxemburg, the Bahamas, etc. China does not accept our ATM charge/Debit cards. Was the 2008 world banking crash not largely due to corruption?
I cannot believe that CBN is finding itself in a wonderful situation of the vaults of Nigeria’s banks being filed with domiciliary account; bank notes does not have the brain power to use this money to help the Nigerian economy, rather than employing the scare monger tactics now being used. If indeed, as it seems, the money came out of the CBN system, then it is unjust to allow the CBN to benefit from its negligence or malfeasance or even its lack of provenance. The duty of the CBN when doling out these vast sums or when it becomes aware that this was going on is to raise the alarm. The argument that the measure it is now taking are aimed at strengthening the naira is an after thought and a careless dereliction of duty.
By the way, all currencies have been sliding down against the U.S. dollar – from Katzastan, Azerbejan, China, British Stirling, the European, the Mexican pesos, the Russian rouble and all the African currencies – Rand, Kwacha’s, and Shillings, etc.
• Dr. (Ambassador) Cole (OFR) is a Consultant to The Guardian Editorial Board.