This one seems like a hail mary pass in America football by the Central Bank of Nigeria: banning transfer of forex (foreign exchange) from one bank customer to another, and the prohibition of forex cash lodgings into domiciliary accounts, by another person, who is not the account owner. As Sun noted, the motivation of this new mandate is to ascertain the utilisation of inflows into customers domiciliary accounts.
The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.
“They can have unfettered access by telegraphic transfers up to a limit of $40,000 monthly for payment of medical bills, school fees, subscription to professional bodies subject to existing CBN guidelines.
“Transfers from one customer to another is prohibited. Transfer within related companies is allowed subject to a limit of $50,000 per month.”
It recommended that proceeds from non-oil exports should be sold to banks, used for repayment of dollar term loans, and self-utilisation for trade transactions for LC, bills and Form A. Also oil export proceeds from E&P companies are to be used to pay contractors and service providers employed by the oil companies in addition to the recommended uses for non-oil FX proceeds.
Largely, the apex bank has now understood what is happening: one of the best investments in Nigeria, since the beginning of 2020, was simply buying foreign currency and leaving it in your domiciliary account to gain value over the naira. We discussed this the other day in Tekedia Live.
Possibly, the apex bank has seen piles of value in domiciliary accounts of rich Nigerians even as those accounts are on HODL position as in the bitcoin world. Yes, you buy the US dollars, put them in the dorm account, with no intention to do any business with them, but wait for them to gain value on the naira.
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As this passes, I hope one day we do not wake up with a CBN mandate that all monies in dorm accounts be converted into naira. Do not bet against that call!
Yet, it is all hail mary pass until Nigeria starts producing things. We are just building financial models but those have to be based on productive systems. By January, the U.S. government will send me another cheque for the rights to my patent which it licensed. Until we can get to that level of creating innovation, the central bank is simply doing dem go dey pose!
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Nigeria’s economic problem is more of a production issue, not leakage or mismanagement; even if no one steals a kobo here, we still won’t have enough.
We keep squeezing a malnourished cow, believing that somehow, it could deliver bountiful milk, it can never happen.
None of these piecemeal measures will make much difference, the CBN is only creative in small things, and never in big things. The folks there have reached their intellectual and imaginative limits, they cannot deliver beyond drawing circles and swapping cards.
We need something totally different, this idea of micromanaging everything is both deforming and suffocating; those who saw poverty and miserliness as virtues cannot lead us to prosperity and abundance. You cannot create wealth if you keep seeing wealthy people as being corrupt and filthy, yet this is the mentality of who we have as president right now.
These people are destroying our essence and diminishing our worth as well, we have seen both their level and capacity; they have not left anyone in doubt, with regard to how atrocious they are.
See what they have turned Nigeria into, a beggar without confidence.
Spot on Francis! Yet I’m afraid that even if this piece was carved in gold and given to them to see they will not see the good points. Let’s just hope that o.e day we may be fortunate to have a leader, not a title holder, who will be visionary enough to know and do the right things.
They kept dragging the people into the Cryptocurrency market. 1bitcoin is about 8 million naira now; all that is needed is a wallet from play store.
We will still keep going there, because that’s where you’re safe. Imagine an inflation of 15% to your funds left here. That’s drastic if you understand how much loss you’re hitting.
I keep telling people, put funds in ventures that grow daily. For me automated FX trading with a 1% daily target is bliss. Best am there and see rapid value than lose 15% due to inflation when I can get those in 3 weeks. Funny policy
Why did the CBN jettison the Dutch auction that attempted to match the demand and supply of forex. No amount of creativity or sanctions by bureaucrats will repeal the laws of demand and supply and the principle of self interest. Furthermore, the CBN is subsidizing forex demand by offering them at preferential rates for whatever reason. Imagine how many state workers will be paid more promptly if forex earnings are disbursed to states at market rates.
I fear things will get worse before they get better. Nigeria did not save for a rainy day. And being so reliant on oil, Nigeria’s fortunes (and exchange rate) will oscillate with oil price. Diversify, diversify, diversify.