An economist, Tope Fasua has urged the Central Bank of Nigeria to bar individuals from operating domiciliary accounts in order to stabilise the naira and quash currency speculation.
“Personal dorm accounts are mostly unnecessary; only companies that are doing international trade transactions or financial market companies should be able to hold dorm accounts because they have a reason to,” he said on Channels Television’s Sunrise programme on Saturday.
A domiciliary account is not intended to save money but allows the owner to fund it with foreign currencies such as dollars, pounds or euros to perform foreign transactions.
However, with the naira’s constant struggle in the foreign exchange market, it is not uncommon for Nigerians to convert the naira to dollars at the parallel market and save in their dorm accounts, fuelling currency speculation as demands for dollars soar.
The Minister of Finance, Zainab Ahmed subsequently said the CBN did not consult her ministry before taking the decision, warning that there will be consequences.
Though the CBN said it followed due process for the redesigned notes, experts feared that the move will trigger higher demands for foreign currencies as money launderers, ransom-taking kidnappers, and those who stashed naira notes in their homes will flood the parallel market in exchange for dollars and pounds.
Curbing Currency Speculation
The CBN had taken a number of measures to curb currency speculation. In September 2021, the apex bank wielded its big stick against an online platform, ‘Aboki FX’ for currency speculation. The apex bank also stopped forex sales to Bureau De Change (BDC) operators, and accused them of being involved in money laundering and illicit financial flows in Nigeria.
Commenting, Fasua said, “The ease at which people move against their currency in this country is too much. It should not be that easy.”
“If you are an exporter, you have export proceeds coming in, you can have a dorm account. If you are an importer and you need to pay your customer once in a while, you can have a dorm account as a company but if every Tom, Dick and Harry can speculate against their own currency you will never get it out of crises.”
The economist said the accessibility of domiciliary accounts by every Nigerian makes it easy to move against the naira and speculate against the local currency.
“If the Central Bank wants to do the right thing, the next thing is to make a rule and a law. The truth is this: it is not those small people (artisans) that I mentioned that are most affected, it is not even their business; the big guys in the society speculate the more,” he said.
Fasua emphasised that “the black market must be outlawed” so that anybody going there must know that he or she is actually doing an illegal transaction.
Raise BTA/PTA To $10,000?
He believed that the apex bank should incentivise Nigerians by increasing Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) to $10,000 however not in cash but in cards.
Fasua noted that the CBN should have done the redesign of the three banknotes long ago as the last time such was done was in 2005.
For him, currency redesign is not an unusual development as countries like the United Kingdom, Ethiopia, amongst others have redesigned their notes in recent times.
He said Nigerians who have anything to fear are those who stashed monies in septic tanks and private vaults, arguing that aside from helping to stem inflation, the move by the CBN will make life difficult for currency-forgers.
‘Redesigned Notes Will Curb Vote-Buying’
Although he said the redesign of the three denominations has nothing to do with the 2023 general elections, another financial expert, Johnson Chukwu believed that the move will halt vote-buying at the polls next year.
Chukwu, the Managing Director of Cowry Asset Management Company, spoke alongside Fasua on Channels Television’s Sunrise programme on Saturday.
“One of the things that the central bank governor said is that among the reasons for the change of the currency is to forestall criminal activities including kidnapping, those who are involved in drugs and other criminal activities including vote-buying.
“We know that it has become a consistent trend on Election Day that people go with stacks of naira notes and buy votes,” he said.