CBN Goes After Racketers in a Bid to Sustain the Country's Local Currency

On Thursday, it was reported that the naira appreciated a little against the United States dollar at the Nigerian Autonomous Foreign Exchange Market to close at N1,498.25/$ from N1,503.38/$ that was recorded at the close of Wednesday trading session.

This was recorded following the CBN release on Thursday on measures that will be implemented to tackle foreign exchange racketeers and other financial services that also engage in such practices. The three circulars released were on Valentine's Day, February 14, 2024.

In the first circular, the CBN stopped banks from paying Personal Travel Allowance to their customers in cash. In the second circular, the CBN asked International Oil Companies to simultaneously repatriate all their revenue to their parent companies. The third circular reads that the CBN  reviewed its guidelines to stop the under-invoicing of exports and over-invoicing of imports.

The circulars came as the naira closed near 1,500/dollar at the official market on Thursday. This was despite commercial banks' drop in dollar supply at the spot FX market.

According to data from the FMDQ exchange securities, the supply rose from $292.3 million to $381.92 million on Tuesday from $89.61 million recorded on Monday. However, it dropped to $117.87 million on Wednesday.

On Monday, the naira was reported to start at an all-time low of N1,534/$, which indicated huge implications and severe consequences for the price of goods and services.

On Tuesday, the naira gained N1,499/$ but fell to N1,503.38/$ at the close of trading on Wednesday before recovering to N1,498/$ at the close of trading activities on Thursday.

On the parallel segment of the foreign exchange market, the Naira depreciated to N1,600/$. Thursday’s rate is about N97 or 6.45%, higher than the N1,503/$ beginning of the week.

What the CBN Is Talking About Racketers

The CBN has reviewed the allowable limit of price deviation for exports and imports to -15 % and +15% of the global average prices, respectively.

The apex bank disclosed this in a circular issued to all authorised dealer banks on Thursday and signed by its Director, Trade and Exchange Department, Dr Hassan Mahmud.

The CBN said the review was due to global inflation and other related challenges. The International Monetary Fund predicted that global headline inflation would fall to 5.8% in 2024 and 4.4% in 2025.

The circular read, in part, 

• Following the implementation of the Price Verification System to curb over-invoicing of imports and under-invoicing of exports, the CBN, in a circular referenced TED/FEM/FPO/PUB/01/001 stated that declared prices of import items that are more than 2.5% above the global average price of the referenced item will be queried.

• However, due to global inflation and other related challenges, the CBN has reviewed the allowable limit of price deviation for exports and imports to -15% and +15% of the global average prices, respectively.