Nigerians’ obsession and craze for dollar has eventually caught up with many especially politicians. The new CBN policy that mandated banks to reject foreign currency cash deposit has put many in a very tight corner. There are several Nigerians who have huge dollar cash the banks will not accept from them as cash deposit.
To worsen the situation, bureaux de change are also rejecting foreign currency cash deposit. Unfortunately for this class of Nigerians the street traders in foreign currencies have also started taking their pound of flesh from shylock currency hoarders who stockpiled foreign currency while the game of trafficking in dollars lasted.
For Nigerians who are old enough to remember the currency change in 1984, what is happening now is similar, though different in nature and context. In 1984, the Nigerian military government of Muhammadu Buhari in an attempt to legitimize its interruption of the democratic process through a military coup d’état directed the CBN to cause a change in the colours of the Nigerian currency. The exercise was designed to render the money alleged to have been stolen by Nigerian political leaders useless in their hands.
The argument then was that owing to the damaging effect of currency trafficking outside the Nigeria shores, the Buhari administration decided to change the colours of the currency notes in April 1984.
This change yielded the desired result as close to N5 billion cash outside the banking system was taken out of the system. The recent decision of the Central Bank of Nigeria to ask banks to reject cash deposit of foreign currencies has started having the desired effect of making the dollar in the hands of those who should be holding Naira ineffective. The banks have turned their backs on cash dollar deposits as well as bureaux de change.
The mallams on the street are pricing foreign currency for sale at ridiculous exchange rate as there is nowhere to deposit cash dollars at the end of each business day for safe keeping. It is the same Buhari that changed the colour of the Naira to stem currency trafficking to render stolen money useless in the hands of politicians that has again made the bold attempt to make ‘stolen dollars’ of no use to those hoarding it.
These huge dollars in the hands of many, mostly rogue politicians, are trapped dollars that no body seems to want. Those in possession of this amount can not take them abroad as they will be charged for money laundering. The money cannot be transferred abroad as no bank will accept to do so. They may have to dig a hole in their bedrooms to bury the money for safe keeping.
This has its own risk, as many may, for the sake of their lives, not trust their wives enough or any member of their families to let them know such money exists in their bedrooms. If they die suddenly, the money dies with them. This in itself is economic slavery and misery.
In the recent past and for many years, politicians and top government functionaries were busy dollarising the nation’s economy. Nearly every government functionary, from the presidency to governors, ministers, bank officials, oil company executives and top business managers, spend dollars in Nigeria unhindered as if it has become a legal tender.
At a point it became a status symbol to dole out dollars, even in social gatherings and wedding ceremonies, men who see themselves as having arrived sprayed dollars at such occasions. Nigeria as a country has not officially adopted the dollar as a legal tender, but, unofficially, it is used as a means of exchange in the payment for goods and services.
Those buying plots of land in Banana Island then and now Eko Atlantic paid in dollars. House rents were priced in dollars. While it lasted many politicians and privileged individuals opened cash domiciliary accounts where they deposited foreign currencies while working in Nigeria. This flooded the economy with dollar cash. Those who laundered money brought some in and deposited them freely in the banks.
In Nigeria today, many residents store their valuables in dollars, liquid assets are moved freely around with the dollar as preferred currency. Those who offer bribes use the dollar. In the last general elections, several politicians went around buying votes with dollars.
Traditional rulers were not left out; they got their own share of the dollar booty. All of these monies are in circulation in Nigeria. Those who thought the game will continue forever are caught in the web and cannot take the money to the bank. The lucky and smart ones were those who opened domiciliary accounts and paid in their fortune. In every economic policy, some gain, some are the losers.
The incidence of the use of dollar in Nigeria arose from the adoption of the Structural Adjustment Programme (SAP) when the CBN officially encouraged the opening of domiciliary accounts, allow hotels to charge and accept dollars from foreigners. That was when Nigeria was in dire need of foreign exchange to foot the cost of accumulated foreign trade bills. This was followed by the high inflation rates which decreased the demand for Naira and raised the demand for alternative assets, including foreign currency and assets denominated in dollars.
This phenomenon called the “flight from domestic money” resulted in a rapid and sizable process of dollarisation of the Nigerian economy. As it is in most countries with high inflation rates, the Naira was gradually being displaced by a more stable currency, the dollar.
The store-of-value function of the Naira as legal tender in Nigeria was being replaced by the dollar. If this goes on unchecked, the unit-of-account function of the naira will be displaced as many prices are being quoted in the local market in dollars. Foreign exchange is supposedly a monetary instrument to facilitate international trade between one country and another.
The scenario playing out in the Nigerian market place shows that Nigerians have tied their livelihood to the dollar. Local production and imported products are now being priced with reference to the fortunes of the dollar. Increasingly, the economy was dollarised with the monetary authorities unable to do anything about it. It suggested then that the CBN was dancing to the whims of the political class.
Now that the CBN has rolled out policies to tackle this pressure point by insisting that all local payments, purchases be made in Naira and refusing foreign exchange cash deposits in local banks, the Naira value may stabilize sooner than expected. Every Nigeria should support the CBN to gain back the value of the Naira as the legal tender in Nigeria.