CBN to sanction local transactions in dollars

                
As part of efforts to stem the incidence of speculative trading in the foreign exchange market and keep the nation’s reserves robust, the Central Bank of Nigeria, CBN, yesterday said a sanction regime against individuals and organisations using the dollar for local transactions would soon commence.

This is just as the apex bank retained the Monetary Policy Rate, MPR at 13 per cent, while other monetary policy interest rates remained unchanged at the end of its two-day Monetary Policy Committee’s meeting concluded in Abuja
Addressing journalists at the end of the Committee’s meeting, its Chairman and CBN Governor, Mr. Godwin Emefiele, said that since the currency for doing business in Nigeria remained the naira, the bank would beam its regulatory searchlight on areas where people are making demands for foreign currency as payment for services with a view to dealing with such abuses as appropriate.
The Governor, who alluded to possibilities in which landlords and school proprietors were asking for payments amongst other dollar- transactions, said the bank would like to advise those who are involved in the unwholesome practices to desist from them or be ready to face the full weight of the law.
Speaking on the current foreign reserves of $30bn, the seasoned banker assured that given the pressures and vulnerabilities the economy has contended with over the past couple of weeks, the reserves was still at a level that can fund imports for about five to six months and support business and the economy.
To keep the reserve robust, Emefiele said CBN would canvass the need for stakeholders in the economy to imbibe fiscal discipline and as much as possible see what could be done to build up the excess crude account.
He hinted of the bank’s determination to begin to taking certain actions that will nip the unneeded demand in the bud.
On the activities of the Bureau De Change, BDCs, in the forex market, the Governor rated the market as shallow, when compared to the interbank market in terms of percentage of the foreign exchange market.
He added that since the BDCs market remained very insignificant and it deals with transactions are not documented, CBN will not be looking at the world outlook for the Naira by looking at the BDC rate.
To move the financial system forward, Emefiele said the CBN would appraise the outlook based on the interbank market exchange rate at N198 to the dollar, expressing the believe that “given the pressure that we have seen in the market such as the drop in crude prices and the pressure that has come with it, adjusting the exchange rate to the current level I will say is okay is sufficiently appropriate.”
He explained further that a number of proactive steps would be taken to deepen the foreign exchange market, improve supply, and look at areas where demand pressure and inefficiencies can come from and mitigate them.
According to him, the apex bank will soon begin to take actions to control big demand that is not beneficial to the economy.
On allegations that the apex bank was prioritizing the sale of foreign exchange amongst other monetary policy imperatives,  the Governor said: “There is nothing like prioritizing sales of forex to foreign investors. CBN on a daily basis or as it deems fit sells foreign exchange to people who have effective demand.
“But what we have done consistently is to make sure that for the foreign investors, we have made a promise to them that it is a free entry and free exit market. That whenever they decide to come and invest in Nigeria and whenever they want out of the market they should be unhindered.”
Meanwhile, the Monetary Policy Committee at the end of its meeting retained the MPR, which is the benchmark interest rate on banks’ lending at 13 per cent and left unchanged the Cash Reserve Ratio, CRR, on Private Sector deposits at 20 per cent;  CRR on Public Sector deposits at 75 per cent; and the liquidity ratio at 30 per cent.
Emefiele said: “We will continue to monitor the liquidity in the system particularly during this election season. In the course of time, the CBN will be taking certain actions, we don’t know what yet, but it depends on the size of the liquidity, the rate at which people use liquidity to target the real sectors of the economy or they use them for what I call the unholy attitude of attacking the currency, depending on the direction that we see people move, we will react appropriately but interest rate outlook for now still remains tight.”
The Committee also noted that while the ugly developments at the global international oil market continued to affect government revenues and reserves accretion and impacted negatively on capital flows, the financial system remained stable with key financial and macroeconomic indicators showing robustness.
Consequent upon this, the Committee directed that the CBN should adopt all necessary measures to improve the resilience of the financial system as well as the overall economic environment and function of the financial markets.
The Governor said the CBN had taken necessary steps to deepen the market, increase the level of transparency and liquidity and improve the ratings of the financial system by global agencies.