The essence of the restriction could not have been to squeeze the small businesses and bit players, but that is what is playing out. They are not the ones responsible for the mess we are in, today. They are not the ones further depleting the limited foreign reserves we have with frivolous spending…We are talking about small time businesses and individuals plugged into the international system, in tune with today’s reality. We are heading into the New Year on the wings of the uncertainty forced on the system by a lax regulator. The banks are feeding fat, while the CBN is snoring. President Buhari needs to wake up Governor Emefiele, and immediately too.
Even though I think the president’s communications team should have anticipated that Wednesday’s media chat would definitely touch on the issue of foreign exchange restriction and get the CBN Governor and others in the economic team to sit with the president and have all the issues to do with this matter thrashed out before hand, the president himself has a way of making up for obvious strategic lapses. He did not overreach himself and smartly promised to look into the issues raised with the Central Bank of Nigeria.
I am happy with President Muhammadu Buhari’s promise to sit with the CBN to review its policy. I am not too sure that the letters of the regulations the CBN has put out is fully in tandem with the spirit behind it or completely in line with the mindset of the president. I am not also sure that the CBN itself fully understands what it is doing, all the ramifications to it, nor is it on its feet to mitigate unintended consequences of aspects of its forex policy.
My thoughts on this matter, in part, have been generously shared in my article, “Robbing in the name of Banking?”But lest there be any confusion, I do not have any issue with the restriction placed on the importation of some items. In fact, I think more items could be added to that list. I do not have a problem with the daily limit set on transactions with the cards, even though it is at enormous expense and huge costs to some of our small businesses. But I have a problem with the restriction placed on depositing forex (cash) into domiciliary accounts in local banks. It makes little sense to me. If it is to guard against illicit inflow and money laundering, there is a robust monitoring mechanism in place if only the banks, agencies charged with monitoring such and the CBN will be true to themselves.
To seek to ban the use of payment cards for online transactions, in this age where life and works has become globally interlinked makes little sense. This cannot be about curbing Nigerians’ propensity for conspicuous consumption, which I even see as an opportunity, rather than a problem.
Transactions are easy to monitor these days and are in fact, being monitored real time. It does not make sense shutting the door in the face of everyone simply to stop a few rogues who are masters at rigging the game, some even involved in drafting the rules of the game. This is particularly important in that for most small businesses and ordinary citizens, they have hardly ever benefited from the official window in accessing forex for legitimate transactions. For as long as I can remember, even with Form M opened the banks always found a way to refer their customers to BDCs. Customers had to fall back on the black market for forex to deposit into our domiciliary accounts, for transfers abroad and funding of fx-denominated cards to meet legitimate small and ‘big’ transactions.
Apart from the routine Basic Travelling Allowance (BTA) and Personal Travelling Allowance (PTA), when available for those who travel internationally, there was not much to the benefit of regular Nigerians. Even the round-tripping carried out by some with BTA was mostly by the usual suspects in connivance with bankers and some ordinary Nigerians seeking to take advantage of a loophole opened for a select few. So, blocking the access for customers to source forex from the black market where the banks are purportedly sourcing from, to service international transactions made with payment cards, does not make much sense.
If a threshold has to be set on how much can be deposited at once, how much can be transferred at once or periodically (already in place) and what purpose that is put to (already in place), that does make sense. To seek to ban the use of payment cards for online transactions, in this age where life and works has become globally interlinked makes little sense. This cannot be about curbing Nigerians’ propensity for conspicuous consumption, which I even see as an opportunity, rather than a problem. One, I believe can be locally tapped to enhance productivity and national development. We are talking about simple regular transactions for training, books, journals, subscriptions, web-related activities, etc. routinely made with payment cards online. We cannot be seeking to promote innovation and shut ourselves out from the international payment gateway.
…only a few months ago, there was too much money in the vaults. Today, there is scarcity, with banks claiming now to be sourcing forex, perhaps from other planets, making the rates shoot through the roof. It is obvious that the banks are the ones calling the shots, with the CBN only lazily tagging along.
The system, as it is, confers a monopoly on banks the ability to bring into the system forex sourced outside the official window. They are taking maximum advantage of that monopoly. Even when they still have access to source forex at official rates, they are charging customers black market rates for transactions with cards, possibly making a kill, given the gap between the official and parallel rates. This is what one of the banks has to say in its official communication to us, in response to our query for charging over N400/pound for an online transaction – “The exchange rate applied to International Card transactions is a reflection of the trend in the economy. The banks, by CBN Regulation, are only allowed to settle card transactions with funds sourced from the Interbank Market. The rate applied to our Card is a function of the current daily Inter-bank rate and not the CBN rate or any other rate you may find on some FX websites.
Please note that the rate for that day was used for your transaction and also note that this rate changes on a daily basis which is a result of the current scarcity of forex in the market which has also force some banks to disable their cards from performing international transactions.”
The bank now reminds us of scarcity when only a few months back, the banks claimed to be overwhelmed with large volumes of foreign currencies and elected to stop accepting foreign currency cash deposits. CBN had welcomed the decision and sanctioned it. So, only a few months ago, there was too much money in the vaults. Today, there is scarcity, with banks claiming now to be sourcing forex, perhaps from other planets, making the rates shoot through the roof. It is obvious that the banks are the ones calling the shots, with the CBN only lazily tagging along.
Banks are taking advantage of their monopoly status, rigging the system and smiling to their vaults. You cannot blame them. They don’t care. They have never cared.
My guess is that the spike in the rates at the black market is itself a consequence of banks mopping up whatever is available at the black market, at whatever rate, assured that they are able to sell to desperate customers still using their cards for international transactions, seeing that those ones do not have a choice and given that not even the little courtesy of informing them of the rates for the day is extended to customers. If you seek to understand why we are where we are, try to look in the direction of those benefiting the most from what is going on.
It could not have been the intent of the CBN to drive the rates through the roof, but that is what the restriction on alternative sources of funding domiciliary accounts and small-time transactions has triggered. Banks are taking advantage of their monopoly status, rigging the system and smiling to their vaults. You cannot blame them. They don’t care. They have never cared.
The essence of the restriction could not have been to squeeze the small businesses and bit players, but that is what is playing out. They are not the ones responsible for the mess we are in, today. They are not the ones further depleting the limited foreign reserves we have with frivolous spending. They are not legislators, trying to buy new cars to replace new ones, in spite of the state of the economy and belt-tightening measures being canvassed. We are talking about small time businesses and individuals plugged into the international system, in tune with today’s reality. We are heading into the New Year on the wings of the uncertainty forced on the system by a lax regulator. The banks are feeding fat, while the CBN is snoring. President Buhari needs to wake up Governor Emefiele, and immediately too. This is not the time for somnambulism.
PREMIUM TIMES
END
Totally totally agree. They should have pre-empted the FX and debit card questions and proactively update PMB since its a vexatious and contentious issues with Nigerians now just like he was on top of his game on fuel subsidy, BH and others. CBN failed him on that one.