It was something many suspected but could not figure out those behind the rampant deals. It has now emerged that a major scandal has hit the new foreign exchange policy of the Central Bank of Nigeria (CBN) as it is now riddled with sharp practices.
The policy, which was introduced in March and implemented in June this year to help stabilise the nation’s currency, the naira, it was gathered, is being consumed by the ‘Nigerian factor’, according to the Street Journal.
The Street Journal also learnt that the policy is being circumvented by government and CBN officials, who have turned the policy into a big time fraud through fictitious companies.
According to informed source within the bank system, government officials in an unholy alliance with some senior CBN staff, use different means to purchase dollars from the CBN and interbanks at a cheap rate only to resell at the parallel market rate.
This magazine gathered that to bye pass the policy, government officials, with fictitious company, would approach the CBN with tales of why they should be allowed to purchase dollars at a certain rate.
With connivance of an insider, this easily sails through, only for the dollars to reappear at the streets, selling at the prevalent rate.
In announcing the new policy on March 24, which abolished the old policy which fixed official exchange rate at between N197 and N199 to USD1, CBN Governor, Godwin Emefiele, had said there would be a window to purchase dollars at lower rate specially designed to fund specific projects.
He said the apex bank would retain a special window to fund critical transactions in foreign exchange, which would likely attract a concessionary rate.
By this development, the interbank foreign exchange market, which had been dead for sometime, was revitalised on unrestricted exchange rate basis.
Emefiele had explained that “the MPC voted unanimously to adopt a flexible exchange rate policy to restore the automatic adjustment properties of the exchange rate,” adding that it voted also to “retain a small window for funding critical transactions” and that “details of operations of the market would be released by the Central Bank at the appropriate time.”
It was learnt that it is this ‘small window’ that is now abused.
According to the source, “Sometimes they (government officials) arm twist the CBN men through subtle threat and blackmail to do their bidding. This is by providing a company’s name that deals in essential need for the country. Through collaboration of an insider, the company is given a concession to buy dollars at cheaper rate, then resell at the parallel market”
Another window of opportunity that presented itself was when the Federal Government on August 5, directed banks and authorised forex dealers to sell to the Pilgrims Travelling Allowance, PTA, to intending pilgrims to Mecca at a concessionary exchange rate of N197 to $1
According to CBN, “Each pilgrim is entitled to purchase a minimum of $750.00 and maximum of US$1,000.00 as PTA.
“The Federal Government has approved that intending pilgrims are to be sold the PTA at a concessionary exchange rate of N197.00 to the US dollar.
“No commission shall be charged by the banks for the sale of the PTA to the intending pilgrims.
“The Central Bank of Nigeria shall sale the PTA to the designated banks in Lagos and Abuja and the accounts of the respective banks shall be debited as soon as the funds are disbursed”.
Meanwhile, this was when the naira dipped to N400 to $1 at the parallel market.
Many who were not pilgrims and could press the right button, rushed to authorised dealers and banks and bought huge amount of dollars undermining the $750 peg per pilgrim.
“This was mostly carried out by government officials who came with all manners of excuses why dollars should be sold to them. At times you cannot ignore or refuse them because they will blackmail you into it”, said the source.
In unveiling the new foreign exchange policy the CBN had on June 15 formally took off flexible foreign exchange policy that would allow the foreign exchange interbank trading window to be driven purely by market forces.
The new policy effectively removed controls on the naira, allowing increased dollar supply that would help strengthen the country’s weak economy.
Emefiele had said in Abuja at the formal commencement that the new framework would operate a single trading window, with about 10 primary traders, to be appointed by the bank.
The CBN took the measure following severe pressures on external reserve and foreign exchange supply crisis.
Emefiele said the Monetary Policy Rate, MPR, was retained at 12.
“In the face of severe pressures on external reserves and foreign exchange supply crises, the CBN abandoned its fixed rate policy in favour of a flexible and multiple market model, which implied a floating exchange rate regime.
The apex bank’s Monetary Policy Committee, MPC, which made this decision, chose to retain its Monetary Policy Rate, MPR, at 12 per cent, Cash Reserve Ratio, CRR, at 22.5 per cent and Liquidity Ratio at 30 per cent”, Emefiele had said.
Isaac Okoroafor, acting director, Corporate Communications Department, said this was not possible because all the interbanks the CBN sells foreign exchange to are required to publish them in the newspapers. Through this they are monitored.
“Look, I don’t normally answer this kind of question. But let me tell you that all the inter banks the CBN sells foreign exchange to are required by law to publish them in the newspapers. This is to check and monitor them. So, if anyone notices or is suspicious of shortfall of any inter bank he should report the bank to us, such bank or individual who engages in the sharp practices will be dealt with”, Okoroafor said.