There are strong indications that the Federal Government is considering a policy shift to address the unprecedented depreciation of the national currency. The proposed policy involves the conversion of foreign currencies held in domiciliary accounts of citizens to naira, with the aim of stabilizing the national currency, which recently experienced its worst performance in history.
Should the government proceed with this plan, it would mandate the conversion of idle foreign currencies in both individual and corporate domiciliary accounts to naira, at a rate determined by the Central Bank of Nigeria (CBN). Top Presidency sources reveal that this move is motivated by the need to counteract the sharp decline of the naira, which saw a 24% depreciation in the official Nigerian Foreign Exchange Market, closing at N1,348 per dollar.
According to a source within the Presidency, the issue of foreign exchange scarcity and the fall of the naira is perceived as an elite problem. The government is unwilling to passively observe certain individuals hoarding foreign currencies at the expense of the national currency.
The source states, “The problem of dollar scarcity is an elite problem. You will notice that this happens at the end and the beginning of a new month. That is when the exchange rate goes up. Invariably, that is when governors collect FAAC (Federal Account Allocation Committee) allocations. Whatever the connection, we don’t know.”
Furthermore, the source highlights that keeping dollars in domiciliary accounts is not a practice observed in other countries, and in Nigeria, there are over $30 billion in such accounts. The government intends to address this issue by implementing a policy where foreign currencies are automatically converted to the local currency upon receipt, rather than being stored in domiciliary accounts.
If implemented, this policy shift would contrast with the earlier stance of the President Bola Tinubu administration, which in September 2023 expressed interest in attracting funds from domiciliary accounts and Nigerians abroad for substantial investments in various sectors of the economy.
Despite potential resistance, including concerns from a bank branch manager in Lagos, who questioned the viability of placing a lien on funds in domiciliary accounts, the government aims to stabilize the naira and align monetary and fiscal policies. A recent meeting between the Minister of Finance and Coordinating Minister for the Economy, Wale Edun; Chairman of the Economic and Financial Crimes Commission, Ola Olukoyede; and the Governor of the Central Bank of Nigeria, Olayemi Cardoso, emphasized the commitment to the rule of law and enhancing the integrity of financial regulations.
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