The Federal Government appears to be considering a policy that would convert foreign currencies in citizens’ domiciliary accounts to naira in order to stabilise the currency, which earlier this week saw its worst performance in history.
If the plan is implemented, the government will order the Central Bank of Nigeria to set a rate for converting foreign currencies that are sitting idle in the domiciliary accounts of individuals and corporate organisations to naira.
Top Presidency sources claim that the goal of the action is to stabilise the naira, which on Monday saw its largest decline on the official Nigerian Foreign Exchange Market, falling by 24% to close at N1,348 per dollar.
The Federal Government will not stand by and watch while certain people hoard foreign currencies at the expense of the naira. The source further stated that the problem of forex scarcity and the naira’s decline was an elite issue.
A source stated that there is an elite problem with dollar scarcity. It will be apparent to you that this occurs at the conclusion and start of each new month.
At that point, the currency rate increases. Governors always receive their allocations from the Federal Account Allocation Committee (FAAC) at that time. We are not sure what the connection is.
“There is no country in the world where people open domiciliary accounts to keep dollars. It happens only in Nigeria. This must be addressed. This is not only a political issue, but it is also an economic issue that must be addressed. Genuine demands driven by economic activities can’t bring this huge pressure.
By June, dollar demands are supposed to have gone down when Dangote Refinery must have started.
“Nobody should keep a domiciliary account if they do not have legitimate foreign currency earnings like salary or getting foreign exchange revenue, either as an individual or as a company. Even if you have foreign exchange inflow as a result of your work, immediately after the money lands in your account, the banks should automatically change it to the local currency and your local currency account will be credited with the equivalent value.
“In Nigeria today, there are over $30bn in domiciliary accounts of individuals. It is in the CBN account. The records are there. It is not right. These are issues we will have to deal with. In other countries, dollars are not meant to stay in peoples’ accounts.”
The President Bola Tinubu administration, which stated in September 2023 that it was seeking to attract funds held in domiciliary accounts and those held by Nigerians abroad into massive investments in various sectors of the economy, will be making a significant policy shift if this is put into action.
This information was released during a press conference in Abuja by Mr. Wale Edun, the Coordinating Minister of the Economy and Minister of Finance.He stated that his team was working to create the necessary conditions to draw these funds into the local economy. He claimed that Nigerians have enormous amounts of money in their domiciliary accounts and large sums they own overseas that they can use to boost the economy.
According to Edun, Nigerians living abroad should also be heavily involved in the new initiative to raise the country’s economic growth rate through resource management and productivity.
The minister had said, “What we can see is that really, there are quite substantial sources of foreign exchange in Nigeria.“There is a lot of cash outside the system, which if brought into the system, increases the money supply of dollars, increases in reserves and so forth.
“There are funds in domiciliary accounts, which if you give people the incentives they will utilise for investment in Nigeria.
“Nigerians in Nigeria have huge holdings of foreign currencies in banks and financial institutions abroad.“We need to provide the environment that brings those funds home to choose to invest in the Nigerian economy rather than foreign economies, which is what they are doing right now.“
If you place money in a bank abroad, you’re investing in a foreign economy. Finally, we also have a huge source of funds from the Diaspora.
“Nigerians living and working abroad, who of course, have their families here and who are interested in keeping a presence here; we have to encourage them to be willing to save in Nigeria, perhaps by improving payment mechanisms; so we have to do a lot to aim at them.“There is plenty of hope and it is our determination to put in place the kind of structures and incentive framework that brings Nigeria money abroad and even Nigeria money outside the system into the financial and economic system to work, to create jobs for Nigerians.”
“It is too early to talk about compliance with the CBN directive by banks.” He spoke on condition of anonymity because he was not authorised to speak on the subject. By next week, when we should have a better idea of what is going on, perhaps we will have a better direction. My bank’s compliance is currently unknown to me; our treasury department will be the source of that information.
However, customers came into my branch today (Friday) to deposit money into their domiciliary accounts, which is not how things used to be.”In my opinion, it will be difficult for the government to seize funds from domiciliary accounts. How much will these funds be worth in naira? The CBN directive is causing the exchange rate to gradually decline.
In the meantime, Olayemi Cardoso, the governor of the Central Bank of Nigeria, Wale Edun, the minister of finance and coordination minister for the economy, Ola Olukoyede, the chairman of the Economic and Financial Crimes Commission, and others met on Friday in Abuja to discuss ways to stabilise the naira and improve the effectiveness of the financial system.”
The meeting highlighted our continuous efforts in aligning monetary and fiscal policies, underscored by a commitment to the rule of law,” the Federal Ministry of Finance’s official X posted.”
Reaffirming the commission’s support for these initiatives, emphasising his dedication to enhancing (the) integrity of financial regulations,” was the quote provided by the chairman of the EFCC. Fintech and banks cannot use IMTO services.
Banks and fintechs are not allowed to conduct international money transfer operations, according to the Central Bank of Nigeria.
“All banks are prohibited from operating International Money Transfer services, but they may act as agents,” the apex bank stated in its “Guidelines on International Money Transfer Services in Nigeria.”Additionally, financial technology firms are prohibited from obtaining IMTO approval.The purpose of the CBN’s new guidelines is to direct IMTOs in conducting money remittances in accordance with the CBN-established regulatory framework.Discussions concerning the future of fintech companies with IMTO licences from the CBN, such as Flutterwave, Interswitch, Paga, and others, have been sparked by this new guideline.
Additionally, the minimum share capital requirement for IMTO operators was raised to $1 million by the apex bank. “Any IMTO intending to operate in Nigeria shall submit its application to the Director, Trade and Exchange Department with the following documents:” the bank said, referring to the listing requirement for operators. A non-refundable application fee of N10,000,000, or any additional sum that the bank may specify at any time, must be paid by bank draft or electronic transfer to the CBN.
“Permission to conduct business in other countries or agency contracts (for all IMTOs). For international IMTOs, a minimum share capital of $1 million is required; for indigenous IMTOs, the same amount.”