The Global Financial Integrity group ranked Nigeria as one of the 10 largest countries for illicit financial flows in the world.
Universal Import Duty and Tax Calculator
Chargeable weight Calculator.
Calculate exchange rate.
Contact Us
Members Advantage
ACCESS LINKS
Ware house support
The report jolted financial experts and the CBN which led to the recent policy of suspending foreign currency cash deposit in banks.
The Central Bank of Nigeria (CBN) few weeks ago issued a press release titled, ‘Renewed vigilance to prohibit illicit financial flows in Nigeria’s banking system.’ The statement signed by Director, Corporation Communication, Ibrahim Muazu, stated that, “The Central Bank of Nigeria (CBN) notes with concern a recent report by the Global Financial Integrity group which ranks Nigeria as one of the 10 largest countries for illicit financial flows in the world. “Although we do not have an independent confirmation of this assertion, the report estimates that about US$15.7 billion of illicit funds go through our system annually. “CBN will increase its vigilance to ensure that Nigerian banks are not used as conduits for illicit fund flows, especially in foreign currencies.
“We note and applaud that in line with global best practice, Nigerian banks have started to curtail the acceptance of foreign currency cash deposits, much the same way as customers in other countries cannot just walk into banks and make foreign currency cash deposits without proper documentation. “We wish to assure all citizens seeking foreign currencies for legitimate personal and/or business interests that there remains ample opportunity to do so within the law. The CBN’s Foreign Exchange Rules have many windows for accessing foreign exchange for legitimate business as well as for personal commitments.” On the above directives and statement from CBN there has been argument and bickering over the suspension of foreign currency cash deposit. Some financial experts and analysts supported the apex bank while others are against the policy.
According to a financial analyst, Mr Ugo Nwafor, Nigeria is a trading country whose main commercial activity depended on importation of semi-finished and finished goods; it will be difficult for import dependence country like Nigeria to regulate foreign currency especially the dollar that has almost become a universally acceptable means of exchange. He told Newswatch Times that the CBN did not understand the dynamics of their customers who they feel that their the main occupation is trading, but forgetting the fact that some of them are into manufacturing and thus require long time loans as well as foreign currency to import semi raw materials. According to him, the recent cash deposit policy will have adverse effects on the economy as it will impact negatively on small scale businesses and cottage industry. “With the new policy, manufacturers will engage in trade by barter, patronize black market which will create invisible banking as there will be more activity in underground economy than for normal economic activities. The underground economy will be bigger because those with dollars in cash will keep them in their homes and engage in round tripping rather than in banking activity. Hence, there will be fewer dollars in banks, but in individual hands in large quantity. “What CBN need do is to have a record of all cash inflows and those with foreign currencies as it will be counterproductive for CBN to deny those who genuinely require foreign currency for business.
” A financial expert, Mr. David Ogwu, thinks “The CBN should create about $200 million bond and sell to the public, but be lenient on those who come up for the bond by imposing the approve fines of N50,000 as this will encourage many people to bring out their dollar; by so doing the CBN will be mopping up the dollars in private hands, if not, many people may decide to keep their money inside their room and when the dust settles, will then bring it out; some can even decide to make underground dollar transactions to importers who will be ready to buy” “Leakages in our border will make nonsense of the policy as most of the dollar will be ferried across our land borders to neighbouring countries on which Nigeria doesn’t have control
” A commercial banker, Mr. Olayeni Adelotan told Newswatch Times that CBN should come out of the box as it cannot have it in both ways; it is either the policy fails or succeeds. “
The apex bank needs to take stock to really ascertain if the policy will work or not, as it will affect some people and benefit others, but the spiral effect is what matters most. We need to be cautious, if not, it will be counterproductive to the benefit of neighbouring countries. There is the need for government to set up a technical committee to access the impact of the policy either to reverse it or continue.” According to him, investors do not like countries with unstable and unpredictable policies that will hamper operations.
All banks across Nigeria have sent electronic mails and SMS to customers informing them of the new policy and actions to be taken by the banks. One of such messages read: “Please be informed that due to the unavailability of outlets for managing foreign currency cash deposits, we have found it necessary to temporarily suspend receipts of foreign currency cash deposits into domiciliary accounts at all our branches nationwide from Monday, 3rd of August 2015. “In addition, foreign currency cash deposits into domiciliary accounts made prior to this notice will not be eligible for outward electronic transfer and can only be withdrawn as cash”. Please note that this temporary measure does not affect electronic transfer of funds into or from your domiciliary accounts and you will continue to have access to foreign currency cash withdrawals from your account”. “Whilst we have had to take this step to temporarily suspend foreign currency cash deposits, we would like to assure you that we are working hard at finding alternative outlets and a quick solution to this situation”. “Kindly accept our sincere apologies for any inconvenience this might cause. Thank you for banking with us.”
A commercial bank staff told Newswatch Times that banks will find a way of circumventing the policy so as to satisfy customers as banks are in business and this is one of the major avenues where they make profit. A customer in one of the banks, Mr Sunday Adeyemo, while commenting on the policy and on some gray areas said, “It seems the new policy is to monitor and record all incoming currencies (deposits) electronically. As old cash balance can only be cashed out and new deposits will only be done electronically, new withdrawals will still be done both electronically and by cash. That means monitoring and controlling the existing “dirty cash” foreign currencies in circulation as they can no longer be laundered back into the system by deposit. But then, what will happen to the old domiciliary account balance that can only be cashed out, and what’s the fate of mallam/aboki who will buy the cashed dollar, pounds or euro from owners? What will they do with the cash if it can no longer be deposited by cash, but only through electronic transfer?” Financial analysts argued that the naira is slowly regaining its strength as it is appreciating daily because of the new rule.
“Barely a week after the policy, the Naira gained many points against several international currencies in the black market. The dollar hovered around N205 from N240, euro was N210 as against N270 and the pound sterling around N300 from N360. In fact, many foreign exchange traders were confused about the rates to sell or buy. Some of them were lamenting that in just three days they lost as much as N30 on the dollar, pound or euro. The confusion was so apparent that some dealers were stuttering when asked about prices of the international currencies “This confusion has been extended to operations and regulations of the foreign exchange transactions in Nigeria wherein the government is making it impossible for honest Nigerians to engage in free trade and regulate their personal activities as guaranteed by the constitution, and this is clearly an agenda to illegally impose a communist economic regime on Nigerians. “The most disturbing aspect of this communist economic agenda is the illegal and unlawful attempt to repeal the provisions of the Foreign Exchange Monitoring and Miscellaneous Provisions Act, otherwise known as Decree No 17 of 1995 and replace it with unilateral imposition of new regulations. “This Act remains the subsisting law regulating the operations of domiciliary accounts in Nigeria and by its provisions therefore, Nigerians are empowered to freely open and operate domiciliary accounts. “As such, any enactment and or regulation inconsistent with the provisions of this Act are deemed void. Thus, the recent foreign exchange transaction restrictions by this government are illegal, unlawful and void. Besides the provisions of the law, In his rejection of the policy, a Development Economist, Akin Awofolaju, believes that “the suspension of foreign currency cash deposits and the retention of Monetary Policy Rate (MPR) to 13 percent to revamp liquidity in the system whereas, basis of MPR reliance for good economy is sordid not to talk about weak fiscal approach. This approach is detrimental to our economy especially to the masses that are already in abject poverty’ it will raise the cost of living of the population”. “Fundamentally, the economic impact of the decision will affect the movement of funds from capital market to the money market due to high interest rate. The current economic situation in Nigeria will not experience the desired growth without proper funding of the real sectors, manufacturing, agricultural etc, to boost our export to rejuvenate economic activities.
According to a Bureau De Change operator, Mallam Isa Hazzez, “The whole thing started when two or three banks took their dollars to the CBN for swap and the CBN rejected the cash.” “As a result, banks now found themselves with huge volume of dollars that are practically useless to them. To protest this development, banks have stopped accepting foreign currency deposits across the counter into domiciliary accounts. “The reality is that accepting such deposits is useless to banks. They cannot trade the currency and they cannot transfer it. So it is useless.” He said the new CBN policy implied that everyone who needs to deposit into domiciliary account must be a money launderer, which is not true. “This negates the purpose of banking. It is a knee-jerk policy which is not sustainable, though it might force appreciation of the naira in the parallel market in the short term.’’ President, Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said the policy had started impacting negatively on the economy as importers had started diverting their businesses to neighbouring countries. “The surplus dollars in the street is unavailable to local importers as they cannot transact with it through their banks. The neighbouring countries are having a field day by mopping up the excess dollar cash liquidity at a very cheap rate for the use of imports to the detriment of local importers. “Our local importers are diverting payments for imports to those countries. They are also diverting their consignments to the ports of neighbouring countries”. “The current situation is enabling business activities to flourish in the neighbouring countries,” he said. Newswatch Times interviewed some respondents on the new forex policy. An Economics student, told Newswatch Times, “If you are a business person and you need to import your goods and you cannot use Naira to do so, what do you do? Simply exchange your Naira to foreign currency and pay it into your domiciliary account so that you can access your funds in the foreign country and import your goods. Naira can hardly work outside Nigeria and you have limit to usage. Certainly, this policy will definitely crash private businesses. Naira may seem to be appreciating now, but definitely it will crash soon. My advice is, since official bench mark is fixed via banks, Naira should be allowed to find its true value in the parallel market. Sunday Onwuahoyi said transactions must be made in Naira. “When you are willing to transact a business from Nigeria, you must make use of Naira to buy from us. The policy will only impact on those who store dollars at home. An ordinary Nigerian that earns about N18, 000/month ($75/month) has no business keeping huge amount of dollar in domiciliary account.” “Let every foreigner coming to buy our crude oil, timber, rubber, cocoa, charcoal and etc pay us in Naira. This will in turn put pressure on their currency and you will see how the Naira would gain value. Nigerians are fast losing respect for the Naira. When we buy goods, we buy in dollars. When we are also selling, we sell in dollars. Most hotels, private schools and various other institutions no longer accept our local currency as a matter of pride. I do not know the number of countries that accept such in their own society. Of what value is a policy that would make me enter into a bank with Ghana-must-go filled with Naira and depart with a handful of other currencies? In the next one month, with this policy, some banks would go bankrupt because they are all into foreign exchange business”. Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said though the initial market response to banks’ rejection of foreign currency lodgment pushed up the local currency, the tide was now turning against the temporary nature of the measure. “It is obvious that the banks cannot continue that way because it is not sustainable. The real problem lies with the faltering fundamentals, like rising speculations over the inability of reserves accretion drive,” he said.
The Head of Research, Afrinvest Securities Limited, Ayodeji Eboh, said the Deposit Money Banks’ (DMBs) stance was laudable, whether or not they are doing it for personal good. According to him, the surging dollar levels in banks were facilitated by speculation and panic buying in anticipation of devaluations, which pressured the naira further, as individuals were withdrawing cash and exchanging them for dollar and storing same in their domiciliary accounts, where it yields no revenue for the bank. The domiciliary account may not have been designed for foreign currency storage, but a platform for foreign transactions; any storage of idle funds there becomes speculative, more so in this period dwindling external reserves. – See more at: http://www.macroglobalogistic.wordpress.com
CONTACT US : CHRIS EKE
MACRO GLOBAL LOGISTICS LIMITED (CARGO)
Direct : + 2348023579513
Email: customercaremacroglobalogistics@consultant.com
MACRO GLOBAL LOGISTICS 
14 thoughts on “EFFECT OF CBN POLICY ON IMPORTATION AND SHIPPING SERVICES TO NIGERIA”