In a bid to solve forex crisis, the Federal Government has proposed an amendment to the Foreign-Exchange Act. This is to enable the imprisonment of anyone who holds foreign currencies, especially the dollar, for more than 30 days.
According to a Bloomberg report, this is the latest measure by the government and the Central Bank of Nigeria to stem the volatility. It is expected to bring stability in the exchange rate and bolster the ailing naira,
The CBN is seeking the power to control capital flows and stop people from taking forex out of the country. The new proposals, was published on the website of the Nigerian Law Reform Commission last week.
The New Draft
In the draft amendment, anybody holding dollars in cash for more than 30 days risk a jail term for as long as two years or a fine of 20% of the amount.
Regulators should also be able to prevent money being repatriated. This is in accordance with the terms and conditions as may be prescribed by the CBN.
The draft stated that the current law is narrow in scope. It prohibits the seizure, forfeiture or expropriation of imported money by the government without providing for exceptions. Hence, the amendment is necessary for effective monitoring and control. It will also ensure probity in foreign exchange transactions in Nigeria.
Meanwhile, stakeholders have reacted to this latest move by the CBN. The apex bank has increased capital controls since the fall in Oil prices, a move criticized by most experts.
According to a Lagos-based research and investment advisory firm, SBM Intelligence, this amendment will further worry foreign investors.
“The CBN wants to take its regulatory onus to frightening proportions. The move smacks of desperation and can only result in negative investor perception and capital flight.”
Meanwhile, the CBN through its Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor denied knowledge of the bill. He said the apex bank did not introduce the bill. He did not elaborate.
However, there are suspicions that the bill could have emanated from the Government.
According to Johnson Chukwu, CEO, Cowry Asset Management Limited, it is a wrong move.
“If it did not emanate from the CBN as claimed by its spokesman, it may have emanated from the Presidency or other sources. But the fact is that when you compel people not to hold dollars after stopping the use of naira debit cards abroad, you are discouraging people to bring in money into the country.”
“You also push more people to the parallel market and create further gap between the official and black market exchange rates.”
DSS officials had launched an attack of BDCs last week. They arrested the black market forex dealers for exchanging the naira at a rate weaker than 400 per dollar.
The naira-dollar official exchange rate, which analysts accused the CBN of still manipulating, is 315 against the greenback.