Federal Government Plans to Stabilize Currency After Dollar Scarcity Crisis
Saturday 3 February 2024
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Amid the recent historic fall in the national currency, the Federal Government is contemplating a decisive initiative termed "Operation Rescue Naira." This initiative involves the conversion of approximately $30 billion in foreign currencies held in domiciliary accounts of individuals and corporate entities into naira, aiming to rectify the challenges faced by the struggling Nigerian currency.
The proposal comes in response to the naira's significant depreciation against the dollar earlier this week, marking a record low. The government's intent is to combat forex scarcity and discourage the hoarding of foreign currencies by individuals, believed to exacerbate the challenges faced by the naira.
High-level sources from the Presidency suggest that the issue of dollar scarcity primarily affects the elite, notably occurring at the beginning and end of each month, coinciding with FAAC allocations to governors. The government aims to discourage the practice of keeping dollars in domiciliary accounts, asserting that such accounts should only be maintained by those with legitimate foreign currency earnings. CONTINUE READING.....
Acknowledging potential challenges in placing a lien on domiciliary accounts, the government is resolute in addressing the economic issue. The conversion rate from foreign currencies to naira will be determined by the Central Bank of Nigeria (CBN). However, concerns are raised about the practicality of implementing such a measure.
Meanwhile, key figures, including the Minister of Finance, the Chairman of the Economic and Financial Crimes Commission (EFCC), and the Governor of the Central Bank of Nigeria, have convened to discuss strategies for enhancing the efficiency of the financial system and stabilizing the naira. The EFCC chairman expressed support for initiatives aimed at improving the integrity of financial regulations. CONTINUE READING.....
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In a related development, the CBN has issued new guidelines prohibiting banks and fintech companies from operating International Money Transfer Operations (IMTO). Instead, they are allowed to act as agents, with the CBN aiming to regulate IMTOs more closely. The central bank has also increased the minimum share capital requirement for IMTO operators to $1 million.
Despite the challenges, the naira has shown signs of recovery in the past three days, closing the week at N1,435.53/$ after reaching an all-time high of N1,482.57/$ earlier in the week. Market analysts attribute the improvement to the CBN's directive for banks to sell excess dollar stock, which has boosted liquidity in the foreign exchange market.
The President of the Association of Bureau De Change of Nigeria noted a shift in behavior, stating that Nigerians have stopped buying dollars to hoard due to increased confidence in the CBN's policy direction. While challenges persist, the government's proactive measures and the central bank's interventions aim to stabilize the currency and mitigate the impacts of dollar devaluation.
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