The Central Bank of Nigeria has banned oil firms, oil service companies, and govt agencies such as the Nigerian National Petroleum Corporation, the Nigerian Ports Authority, etc from selling foreign exchange directly to banks. This makes theCBN the only official source of foreign exchange for banks that bid on behalf for clients.
Banks can also apply for bureaux de change licenses as the CBN continues to move to plug the system. But the naira is now trading at N167 against the US dollar in the black market while the official exchange rate is at N145.85 to the dollar.
These moves by the CBN are slowly dismantling the pillars of the foreign exchange liberalisation policy that has been used by the CBN in the last few years. The Foreign Exchange Management Act of 1995 allows exporters maintain foreign currency account balances to finance their export proceeds as they want; and provisions for Nigerian residents to have foreign currency deposits in domiciliary accounts with local banks.
The inter-bank market has effectively been shut down and the recent CBN moves have been heavily criticised by foreign exchange dealers and international investors who are concerned that as the Central Bank defends the naira, it is reversing the liberalised foreign exchange regime.
The CBN circular said, “In order to ensure consistency with the RDAS framework, avoid leakages and abuses in the utilisation of foreign exchange, the procedures for the sale of foreign exchange by oil and oil services companies, NNPC, NPA, NMA, Shippers Council, and other government agencies to meet their local commitments are hereby reviewed as follows:
“(1) With effect from February 26, 2009, oil and oil services companies operating in Nigeria are now to sell their foreign exchange receipts to the Central Bank of Nigeria only;
“(2) All government agencies earnings foreign exchange including the Nigerian National Petroleum Corporation (NNPC), Nigerian Ports Authority, Nigerian Maritime Authority, the Shippers Council, etc are required to sell their foreign exchange to meet their local currency requirements to the CBN only;
“(3) The price at which the CBN stands ready to buy foreign exchange shall be at no more than one per cent (1%) below its immediate past selling price at the RDAS.”