Nigeria Government Proposes Gaol Term for Dollar Hoarders
The Federal Government of Nigeria has proposed an
amendment to the Foreign-Exchange Act to enable the imprisonment of anyone who
holds foreign currencies, especially the dollar, for more than 30 days.
This is the
latest measure the government and the Central Bank of Nigeria are considering
to stem the volatility in the exchange rate and bolster the ailing naira,
according to a Bloomberg report.
In the new proposals, which were published on the
website of the Nigerian Law Reform Commission last week, the CBN is seeking the
power to control capital flows and stop people from taking forex out of the
country.
According to the draft amendment of the Foreign Exchange Act, 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 per cent of the amount.Regulators should also be able to prevent money
being repatriated “in accordance with the terms and conditions as may be
prescribed by the central bank from time to time,” the draft states.
The existing law is “narrow in scope and prohibits
the seizure, forfeiture or expropriation of imported money by the government
without providing for exceptions,” it adds.
The amendments, according to the document, are
necessary “for effective monitoring and control, and to ensure probity in
foreign exchange transactions in Nigeria.”
The CBN has increased capital controls since the
price of oil, Nigeria’s main foreign exchange earner, started crashing in the
second half of 2014.
It had pegged the naira for 15 months until June
this year, a move analysts blamed for causing investors to flee the country,
the economy to contract in the first half of the year and the inflation rate to
rise to an 11-year high.
The latest move will further worry foreign
investors, according to a Lagos-based research and investment advisory firm,
SBM Intelligence.
The Department of State Security officials had
last week arrested some black market forex dealers for exchanging the naira at
a rate weaker than 400 per dollar, compared with the existing street rate of
around 460.
The naira-dollar official exchange rate, which
analysts accused the CBN of still manipulating, is 315 against the greenback.
“The CBN wants to take its regulatory onus to
frightening proportions,” analysts at SBM said in an e-mailed note in response
to the new draft law.
“The move smacks of desperation and can only
result in negative investor perception and capital flight,” they added.
The Acting Director, Corporate Communications,
CBN, Mr. Isaac Okorafor, said the apex bank did not introduce the bill in a
text message response to Bloomberg. He did not elaborate.
The Chief Executive Officer, Cowry Asset
Management Limited, Mr. Johnson Chukwu, while reacting to the development said,
“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.”
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