The Central Bank of Nigeria is always fighting moving targets. The latest is that the apex bank wants to bar exporters who do not repatriate their export proceeds from participating in Nigeria’s banking services. I am happy the CBN now understands the “voodoo” in the system where some companies exist to “export” exchange rate arbitration and make tons of money on it.
Nigerian exporters that have not repatriated export proceeds will be barred from all banking services from Jan. 31, the central bank said. The new directive applies to exports up until June last year, central bank spokesman, Osita Nwanisobi said by text message on Saturday. “Proceeds for oil is to be repatriated within 90 days and non-oil within 180 days.
The measures are part of an effort to defend the country’s currency by targeting importers and exporters with tougher regulations. That’s after a plunge in oil prices and the coronavirus pandemic led to dollar shortages in Africa’s largest crude producer resulting in a wide spread between the official exchange rate and the parallel market. The differential of about 25% has created an incentive for exporters to divert forex income to unofficial channels.
Yes, someone wants to “ship” money out of Nigeria to New York. He comes to you who exports palm oil from Umuahia to London; he credits you. The person paying you in London instead of wiring money to you in Lagos pays the person in New York. Magically, that New York company has moved money and the apex bank has no trace of it. Do that many times, the Naira remains beaten down.
Of course, companies are resorting to that because CBN gave them a really bad choice: The CBN expects exporters to sell their export proceeds through the I&E window. I&E window currently trades at N395/$1. No exporter will sell their foreign exchange at that rate when they can get willing buyers at N485 to N495.
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So, most exporters have gone to open overseas accounts or alternatives, and CBN has lost control! Now, you see this letter (below)
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Interesting, though this policy seems draconian, it seems its one of the few jokers left in CBNs pack of policies.
Can CBN legally stop a registered company from using banking services??? (This would lead to a lot of litigation) .If you shut down my business=workers lose their jobs=unemployment increases=I cannot pay my company /PAYE Taxes=Government loses revenue=GDP reduces=inflationary pressures mount etc.
Will the implementation of this policy significantly reduce the arbitrage opportunity between the parallel market and official rate??
What is the total volume of export since June 2020 to date??
Considering the fact that we are perpetually running on a negative Balance of Trade,this policy might not be so effective or sustainable unless there is another muted deregulation coming up very SOON.
The contraption called Nigeria was created in a fraudulent way, so it’s never surprising that its inhabitants and constituents always find ways to beat the flawed system. Nigeria was built on nothing, it has no soul, rather it’s well set up for exploitation and plundering.
You cannot legislate on morals, fix the moral crisis, and you will have a nation. For now all you have are merchants and mercenaries.
Strange place.
I need money to in cress my business