The Central Bank of Nigeria (CBN) has issued a stern warning to commercial banks involved in unauthorized foreign exchange (forex) sales, threatening to impose sanctions on those found engaging in such practices. This directive comes in response to the recent devaluation of the naira to over N950 per US dollar in the parallel market, spurred by worsening forex scarcity and allegations of deposit money banks diverting forex to the unofficial market rather than serving their customers.
The acting Governor of the CBN, Folashodun Shonubi, conveyed this message while delivering a lecture titled “Diaspora Remittances and Nigerian Economic Development” in Abuja. Shonubi emphasized the necessity of implementing strict measures to curb illicit remittances and channel funds through legitimate avenues to stimulate economic growth.
Shonubi revealed that the CBN has established a commission to conduct unannounced inspections of banks suspected of unlawfully trading dollars. He expressed his determination to hold commercial banks accountable for their actions, stating, “We need to name and shame commercial banks involved in such malpractices.”
Highlighting the drawbacks of the present remittance system, Shonubi estimated that the cost of transferring money to sub-Saharan Africa from the diaspora amounts to approximately 8-9% of every $100, the highest in the world. Despite this, Nigeria received approximately $16.7 billion in remittances, most of which entered the informal foreign exchange market.
The acting Governor elaborated, “We are working hard to encourage individuals to bring money into the formal sector rather than relying on informal channels, which have become difficult to manage.”
Furthermore, Shonubi disclosed the plan to rename the foreign exchange market, known as the Investors’ & Exporters’ (I&E) window, to the Nigerian Foreign Exchange Market, indicating its sole official recognition by the CBN. He also acknowledged the importance of incentives in luring individuals to participate in formal market transactions, despite discontinuing the N5 rebate through the Naira 4 Dollar scheme due to its ineffectiveness.
Ayodele Adeleke, Commandant of the National Institute of Security Studies, emphasized the significance of the lecture series in raising awareness about security concerns in the country. He described the series as an essential component of the institute’s 10-month course to enhance and spotlight the program’s focus.
Shonubi attributed the naira’s depreciation against the dollar and its inability to manage the forex market to the diversion of diaspora remittances to unofficial markets like the parallel. He stressed that many remittances entered Nigeria in dollars, but due to their undocumented nature, they ended up in the unregulated parallel market, fostering an environment conducive to criminal activities.
