The restriction placed by the CBN on 41 items’ access to foreign exchange and Bureaux De Change has generated so much heat that some highly placed Nigerians and foreign investors are calling for drastic action against the CBN. It is quite unfortunate that Nigerians have very short memory. As a young graduate of Economics and a reporter in 1987, some of the issues rearing their ugly heads now were the same issues we reported then. Then as it is now the CBN has always been vilified whenever there is drop in the supply of foreign exchange in the country. The CBN at such critical moment in the economic history of Nigeria had bent over backward in attempt to redeem what looks like a hopeless situation. Emefiele CBN Governor At such times it rolls out control measures that in the last three decades have been its last resort.
In 1988, in an attempt to save the Naira, CBN under the leadership of Governor Abdulkadir Ahmed blacked out eight newly licensed banks from access to foreign exchange market. It denied them access to foreign exchange because they were said to be involved in foreign exchange speculation that is capable of distabilising the economy. In 2002, Joseph Sanusi, then CBN governor withdrew the foreign exchange dealership of 21 of the 90 banks in the country that were found to be involved in foreign exchange malpractices. Prosessor Chukwuma Soludo as CBN Governor in 2005 liquidated 23 banks which did not meet the N25 billion consolidation mark. Looking through my reporters diary, on October 19, 1987, I wrote a news report in defunct The Republic newspaper titled “CBN bars 80 firms from FEM.” An excerpt:
“The Central Bank has barred 80 companies from further access to official foreign exchange. The order came as a result of the refusal of the companies to submit their shipping documents for scrutiny. Republic investigation revealed that it has become a practice among Nigerian companies to purchase foreign exchange and divert the money to purposes other than the one in which they were intended on purchase. CBN sources disclosed that such companies now refuse to submit their shipping documents for inspection. The shipping document include the bill of lading (clean or dirty) which importers use to take delivery of goods. The bill also gives a detailed description of the type of goods, the state and stage of the goods during shipment.
From my diary, CBN denied 728 firms access to foreign exchange in the first half of 1987. On December 7, 1987 I wrote the report that 728 companies were barred from access to foreign exchange by the CBN. Another excerpt: “A total of 728 companies and individuals were blacklisted from procuring foreign exchange because of their involvement in different forms of foreign exchange malpractices during the first half of 1987.
Investigations conducted by The Republic revealed that 336 companies, mostly those registered as private companies, 228 individual Nigerians believed to be students and 164 foreigners were involved in the foreign exchanged malpractices. According to our investigations, none of the companies quoted at the Stock Exchange was involved in the shady deals. It was revealed that most of the companies that were blacklisted by the Central Bank used forged forms‚ “Form A” to apply for foreign exchange. Most of the companies were also caught using Nigerians to front for them in foreign exchange deals especially in companies where Asians have shares. The 228 individuals blacklisted were those who pose as students in Federal Government approved schools overseas when in actual fact they were not studying abroad. In some of the cases, Nigerians who have access to position of authority faked studentship while they trade with the proceeds of the foreign exchange they got from the Central Bank. Some were known to have connived with embassy officials to obtain the enabling documents to apply for scarce foreign exchange.
The most prevalent in the series of embargo were exporting firms that refused to repatriate home the proceeds of their foreign exchange earnings. It is the same thing that is happening now 28 years after. On June 18, 1987, I wrote another report that “Inter Bank dealing likely” to be restored. The CBN had in attempt to bring sanity into the foreign exchange market banned inter bank dealing in forex. Another excerpt:
“The present ban on inter-bank dealings on foreign exchange will be lifted at the end of the current two-tier exchange system investigation has shown. An informed source at the Central Bank of Nigeria, CBN, said that when this happens the CBN would deal like any other bank selling and buying foreign exchange over the telephone or telex to and from other participants in the inter bank market. The source added that autonomous source of funding is expected to play a significant role or even replace the official sources as the main supplier of funds to the market. The current bidding sessions will pale into insignificance and be phased out when this is realised. The bidding sessions are being used as a vehicle for injecting official funds into the market. This expectation has not been realised.” In another report on 18 June 1987, I wrote that the “CBN made it mandatory for authorised dealers under SFEM to submit a detailed list of transactions with the Central Bank of Nigeria, CBN, before any bidding session.
This CBN order effective from today is contained in a circular issued to dealing banks yesterday which is expected to check illegal inter-bank dealings and participation of banks in the parallel market”. Pre-SFEM import: N2.6bn tied down As recorded in my diary, as at February 1988 “About N2.6673 billion was paid by importers into the account of commercial banks that are still awaiting foreign exchange cover from the Central Bank.
A large portion of the money had been paid into the banks since 1983. The Republic gathered that N1.4285 billion is already paid to the Central Bank, while the balance of N1.2388 billion which represents the advance deposits paid by importers against letters of credit is trapped in the commercial banks. The backlog was caused by foreign exchange crunch which hit the country. Accordingly, CBN cannot provide foreign exchange to facilitate the transfer of the money to overseas creditors before the introduction of Second Tier Foreign Exchange Market (SFEM).
The hike in exchange rates put the importers who had already settled their bills in a difficult position as they were being asked by their bankers to pay the new rates”. The diiference between what the CBN did then and now is the mere fact that in those early days the CBN imposed penalties on those who infringed the rule, but today the CBN is asking Nigerians to look inward in a concious effort to make Nigeria a productive economy rather than being a consuming economy.
Private sector operators that are veriferious of the CBN policy, I do believe do not want to get to this point where the CBN can not provide foreign exchange cover for import. Each time a new policy is put in place, those whose vested interest are affected by the decision mounts campaign for the CBN governor to be removed. In each of these cases, the President took side with the CBN. It was only Dr. Ibrahim Ayagi and Oladele Olashore who were MDs of banks that opposed the CBN in 1987 that were unceremoniously removed from office. President Muhammadu Buhari has openly sided with the CBN; Nigerians should learn to obey the rules of engagement in the forex market.