There is only one fundamental truth regarding foreign currency in a local economy; it is only meant for international transactions. nothing more, nothing less. In a local economy, it is not to be sold like a commodity as seen in major cities, not to be used as a store of value as seen in domiciliary accounts and in private homes, and not as a legal tender.
Isn’t these the reason why we have a local currency?
This recession is foreign currency induced. But that does not mean that the shortage of foreign currency is as result of the fall in oil prices. The true cause of this recession is borne on the unnecessary need to operate a cash domiciliary account, the importation of foreign currencies into Nigeria by the CBN, and sales of remittance proceeds to Bureau de change creating more demand for foreign currency beyond Nigeria’s economic needs thereby putting unnecessary pressure on Naira.
The growing need to use forexes as an alternate medium to store wealth in our local economy is the real cause of our recession. And the sales of foreign currency like a commodity creating a sea of worthless wealth floating around the whole nation worsens the recession.
This has led to massive hoarding of forexes needed for international economic transactions.
With all the millions and billions of cash dollars discovered by EFCC in soakaways, in private houses, in state government houses, thereby depriving the economy of the needed forex for international economic transactions. There has never been a time in Nigeria to go cashless with foreign currency than this period”
In my previous article and study of the real cause of this recession I found out that this recession is not entirely the direct result of the fall in oil prices. If it is, naira should be appreciating as oil price is rising. infact, naira is worst off now that oil price is $54.8 than when it was $39.
Given what I now know why studying this recession, Nigerians should be happy for this recession. Not for the fall in revenues and the hardship that comes with it. But that we should see clearly and start asking question about the unsustainable cash monetary policies of CBN with regards to international transactions in hope that we’d reposition Nigeria for a truly sustainable development that will benefit all Nigerians.
The truth is that this present administration’s fight against corruption has inadvertently trigger a massive need for corrupt officials to hoard stolen money. And given free access to cash foreign currency and domiciliary account, corrupt officials will rather hoard stolen public funds in foreign currency and transferred out of the country gradually through the commercial bank than leave it in naira.
This is the same reason the total value of foreign currency in domiciliary accounts in our commercial banks increased from $1billion to over $20billion within a space of one year. Why our economy is shrinking due to lack of foreign currency, our domiciliary account balance is enlarging on daily basis.
Have you ever asked yourself how is it that our local bank accept cash forexes here in Nigeria and is able to make same equivalent transfer into a foreign account. My speculations here is through the proceeds of remittance by Nigerians in diaspora. It is the only way. This is why Nigeria can not account for over $35 billion of remittance. Forex that is capable of getting us out of recession.
Have you ever wondered why of all these cases of money laundering, looting of the treasury, the recovery of stolen public funds from the hands of corrupt officials none has gone to jail?
The answer lies in the law “ Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 1995”
Chapter f34, paragraph 17, section 1 blatantly legalises corruption. A direct implication of this law is that once a stolen public fund is converted to a foreign currency, no law enforcement agency can ask about the sources of that fund. It will now be against the law to enquire about the source.
Patient Jonathan currently in the net of EFCC over the alleged discovery of $15 million in an account linked to her can use the above law and win the case easily. Infact, with the above laws, it will become unlawful to enquire about the source of the $15 million.
The same chapter legalises personal domiciliary account ownership. And domiciliary account ownership is the worst thing that ever happened to all Nigerians. Some Nigerians still don’t know it yet. It serves no lawful purpose, but it is very useful to money laundering activities.
The Central Bank of Nigeria through commercial Banks could easily provide the services a domiciliary account provides with a naira accounts. The truth is that the CBN and government has prevented Nigerians and importers from making international transactions from a local bank account which is inline with best practice. But for some reason beyond economics decided to sale forexes to banks and Bureau de Change at a low prices and expect importers and Nigerians to buy it from them at a much higher price thereby increasing cost to everyone.
Where it becomes very interesting is that domiciliary account will not function without foreign currencies in cash forms. No one or country can operate a domiciliary account without cash forexes.There is no law that requires CBN to deal in cash foreign currencies, none that I know of. Dealership in cash or cashless foreign currency is totally at the discretion of CBN.
Yet CBN chose cash foreign currency dealership. Knowing Fully well that cash foreign currency and domiciliary account ownership goes hand in hand in money laundering, hoarding of forexes, currency speculations, multiple exchange rates, black market and is implicated in almost all cases of money related offences of government officials.
A simple cashless policy would have made all the above impossible. This is the most single reason I believe in a conspiracy to defraud the nation indefinitely by those who make the laws.
Not until we go cashless with foreign currency Nigeria will never truly come out of this recession. Even if oil prices bounces back, even if we come of of this recession because of it, Nigeria will still remain vulnerable to recession as long as we still deal in cash forexes.
How can a cashless foreign currency policy get us out of this recession?
If you are one of those facing hard times in this period of recession I would guess that you have had countless sleepless nights thinking about the huge difference the hoarded cash foreign currencies discovered in soakaways, privates homes, pit latrines and domiciliary account could make in this recession.
By cashless foreign currency policy I am talking about a situation where Nigerians will no longer need a domiciliary accounts that requires buying cash forexes from the banks, bureau de change and black market but can make international transactions straight from their local bank accounts in commercial banks via central bank.
Cashless foreign currency policy will solve all of Nigeria’s problems that relates to foreign currency by preventing money laundering.
What use are cash foreign currencies when Nigerians can make transactions from local accounts?
Remember that the main purpose of cashless foreign currency policy is to eliminate the over bearing pressure on naira exacted by hoarding activities, funding of domiciliary accounts for speculative purposes, and its sales in black markets.
Even prioritising international transactions as a result of scarcity will be far more effective and efficient in a cashless system than in a cash system.
Detecting illicit transactions is more effective and efficient in a cashless system than in a cash system
Allowing EFCC access to CBN’s database with regard to international transactions and payment and making it known to all Nigerians will act as a disincentive to money laundering.
How would this work?
CBN Should stop importation of cash foreign currencies into Nigeria.
The Central Bank and the government should as matter of urgency revoke the right of commercial banks to keep and deal in foreign currency. Because all money laundering activities are carried out through commercial banks that break CBN guidelines.
And streamline all incoming forexes, especially remittance to the CBN only. The dollars should then be used for international payment of naira transactions by Nigerians. This means that Nigerians should be Allowed to make international transactions from local accounts.
By these the bank is creating a strong mutually reinforcing two way system of naira to dollars and dollar to naira systems of foreign exchange management that will reflect true economic transactions. This will stabilise the naira in the short and long run.
This means that all outgoing foreign transactions will only go through CBN via commercial banks.
This will improved accountability and transparency and provide the apex bank with more information to adequately clamped down on illicit transactions because with time the CBN will have enough data to form a trajectory of foreign expenditures. And a deviation from usual transactions could easily be detected and identify. This will put the CBN on the forefront for the fight against money laundering and corruption it has always preached.
A cashless foreign currency policy:
– Will restore and stabilise the naira and bring our economy out of recession within two months.
-Will make the black market redundant because without cash there will be no black market.
-Will prevent corrupt official from siphoning public funds out of the country
-Will reduce all the inefficient bureaucracy associated with making transaction in foreign currency.
-Will increase accountability and transparency,
-Will boost local production and employment,
-Will increase revenues from remittance by Nigerians in diaspora.
-will conserve our external reserve
Above all, with cashless foreign currency, there will be just one single rate of exchange rate to a foreign currency. Not multiple rates as we have now. This is because multiple exchange rates thrives with only cash.
This will reinforce revenues from remittance as a single rate will remove the incentive to patronise unlicensed international Money Transfer Operators by Nigerians in diaspora by making them use the official channels of money transfer.
By Anthony Weli, B.A Hon. Economics / Political Science, M.A Development Studies. He can be contacted at – [email protected]
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