The Nigerian government has introduced a nine-month dollar cash deposit program beginning October 31, 2024, in its latest attempt to stabilize the naira amidst its free fall.
Announced by Finance Minister Wale Edun following the 144th National Economic Council (NEC) meeting, the initiative permits Nigerians to deposit dollar bills held outside the formal banking system without facing penalties, taxes, or scrutiny. The move aims to increase the nation’s dollar reserves and ease inflationary pressures caused by high foreign exchange (FX) demand.
At a post-NEC briefing, Edun emphasized the government’s hands-off approach to scrutinizing deposits, saying, “There will be no penalty; there will be no taxes, and there will be no questions.”
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He explained that individuals holding cash dollars outside the formal banking system can safely bring them into the financial network by meeting basic Know-Your-Customer (KYC) requirements without facing penalties, provided the money is not tied to criminal activity. The intent, he stated, is to secure these funds and make them available for legitimate economic activities.
The program reflects a larger pattern of currency reform measures by President Bola Tinubu’s administration, aimed at strengthening the naira against an ongoing FX crisis. The naira’s downward slide has been linked to a combination of FX illiquidity and Nigeria’s reliance on imports amid low productivity and a limited export base.
Against this backdrop, the government has been counting on diaspora remittances to boost FX inflow amid the decline in oil revenue. Although the central bank announced recently that Nigeria’s FX reserves have reached $40 billion, the naira has kept depreciating in the FX market, falling as low as N1,700 per dollar.
“One element of the cost increase is the foreign exchange rate, which is demand and supply,” Edun said, underscoring the government’s desire to address inflation and support the naira’s stability through increased liquidity.
“The program will allow people to bring in cash from outside the banking system. Let me emphasize once again: it is to bring dollars they are holding outside the system, to credit their bank accounts, as long as it is not proceeds of crime or illicit money,” he added.
Under the program, the Ministry of Finance, alongside the Central Bank of Nigeria (CBN), will soon release comprehensive guidelines to operationalize this initiative. The government hopes that, by attracting dollar bills into the financial system, it can increase dollar reserves, add liquidity, and in turn strengthen the exchange rate while discouraging currency speculation.
This strategy, however, has sparked mixed reactions among economists and policy analysts who question its potential impact on Nigeria’s broader economic issues. Criticism centers on the government’s tendency to employ short-term monetary solutions without addressing core structural problems such as low productivity and a limited export base.
Oluseun Onigbinde, founder of the civic group BudgIT, expressed concern about the focus on financial tweaks rather than production-driven solutions.
“Instead of locking yourselves inside a room for 18 hours on how to make this country an oil and non-oil export powerhouse in the next three years, within a clear future global trade simulation; we are still playing with mirrors,” he remarked, emphasizing the need for policies focused on strengthening Nigeria’s productive capabilities.
Onigbinde went on to highlight the importance of fiscal discipline and sustainable economic growth strategies, stating, “One day, Nigerian leaders will realize that there’s no substitute for production and fiscal discipline. It might be too late.”
His comments echo the views of other experts who argue that the country must prioritize boosting local production and reducing dependency on imports if it hopes to attain meaningful currency stability.
This nine-month program is the latest in a series of strategies by the Tinubu administration aimed at restoring confidence in the naira. However, economists have advised that a holistic approach focusing on fiscal responsibility, production incentives, and investment in non-oil exports will be needed if Nigeria is to achieve lasting economic stability.