The Central Bank of Nigeria (CBN) once again brought the issue of dollarisation of the economy to the fore when it stopped the further depositing into domiciliary accounts. The apex bank has declared that it would sanction individuals and organisations using foreign currencies for local transactions. While reiterating that the currency for business transactions in Nigeria remained the Naira, CBN Governor Godwin Emefiele vowed that the apex bank would examine areas where dollar requests were made just to pay for goods and services in Nigeria as opposed to using the foreign currency for imports.
While we welcome CBN’s move we hope that the apex bank will this time around walk its talk. It would be recalled that the former governor of CBN, Mallam Sanusi Lamido Sanusi also decried the dollarisation of the economy and vowed to wage a war against it all to no avail. In view of this, we urge the apex bank to go beyond rhetoric and put an end to this illegality in the interest of the country. Dollarisation refers to the use of foreign currency (not only the United States dollar) in place of the domestic currency as a store of value, unit of account, or medium of exchange within the domestic economy.
Contrary to the CBN Act 2007, which stipulates that “The currency notes issued by the bank shall be the legal tender in Nigeria,” the dollar is increasingly being used as a means of exchange in the payment for goods and services in the country. Many property owners and estate developers in major cities like Lagos, Abuja, Port Harcourt and a few other places price their properties or rents in dollars. Many elite schools, supermarkets, airlines and hotels, especially those in the 5-7-star category now prefer to be paid in dollars rather than the naira.
The public sector too contravenes the CBN Act as seen in the award of contracts to foreign contractors and companies in dollars by government and the sale of government properties in dollars. Also, Nigerians hold dollars, pounds, and euro as a store of value rather than the naira which they consider as unstable. Equally guilty of this illegality are top government officials, politicians and business executives who spend foreign currencies, especially dollars, in Nigeria unhindered. It is a known fact that politicians usually mop up dollars and other foreign currencies in the open market which they use to induce the electorate during campaigns. The absurdity has even been taken to a ridiculous level such that the “big boys” spray dollars at social functions just to prove that they belong to a special class.
Bribes are even offered in dollars, a case in point being the bribery scandal that rocked the House of Representatives ad-hoc committee on the subsidy regime led by Farouk Lawan. The illicit transaction exposed how corrupt politicians and the business class promote the use of foreign currencies for their nefarious transactions at the detriment of the Naira.
The unrestrained demand for the dollar for all sorts of domestic transactions is putting a lot of pressure on the Naira causing it to tumble against other foreign currencies. The naira has declined considerably from ₦116 in 2008 to the current ₦235 to the dollar. The volatility in the foreign exchange rate is a consequence of the pressure on the national currency and by stabilizing the currency, government can encourage greater trade and investment. It is high time CBN restored order in the money market in line with its core mandate which is maintaining financial system stability and the restoration of investors’ confidence in the financial sector.
The Naira is Nigeria’s official currency and the symbol of her sovereignty and so must not be undermined in any way. Our national currency must take precedence over any other currency in domestic transactions. Treating it as an inferior currency amounts to economic sabotage and should attract severe sanctions in accordance with the CBN Act which stipulates that “any person(s) who contradicts the provision is guilty of an offence and shall be liable on conviction to a prescribed fine or six months imprisonment.” The CBN should involve the Economic and Financial Crimes Commission (EFCC) in the arrest and prosecution of those who undermine the Naira in order to drive home the point that it is no longer going to be business as usual.
However, the CBN must not fail to address the factors that drive the overbearing demand of the dollar by Nigerians. There is need to curb inflation which is one of the reasons the Naira is being displaced by more stable currencies. The financial sector regulators should also provide Nigerians with alternative financial instruments denominated in the Naira to serve as inflation hedge. This will help to curb the resort to foreign currencies to preserve liquid assets. Also, there is need to improve Nigeria’s industrial capacity. Over-reliance on importation weakens the national currency because there will always be pressure on the Naira. The task before CBN and the Ministry of Finance is to initiate policies that would reinvigorate ailing industries and strengthen the country’s production base. This will reduce the demand for foreign currencies and take some pressure off the Naira.