Currency Trafficking , BDCs & CBN

In October, several media reports confirmed that two men are now helping Economic and Financial Crimes Commission (EFCC) operatives with information on how they came about $986,000 found on them at Lagos and Kano International Airports respectively.

  The duo, Nkem Sebastian and Alhaji Tasiu Kura, were apparently arrested in separate operations as they were about to board their flights to Dubai.   Alhaji Kura was nabbed with the sum of $700,000 in Kano while Sebastian was arrested with $286,000 in Lagos.

The two arrests, according to the reports, came barely 48 hours after EFCC arrested 24-year old Abubakar Tijani Sherif, whom EFCC described as a bulk money smuggler, with over $7 million at the Murtala Mohammed International Airport, Lagos, en route the United Arab Emirate.

In a related report, the EFCC noted that 'globally, bulk cash smuggling is usually associated with proceeds of crime, where illegitimately earned funds are processed outside the banking system'.

Instructively, travelers leaving Nigeria are statutorily required to declare cash in excess of $10,000; however, under the provision of the Money Laundering Act, the onus is on the person making the declaration to explain the source of the excess cash and the reason for the export.

Incidentally, such arrests are not uncommon; for example, in December 2009, Mrs. Emem Etuk, Manager of the now defunct Bank PHB, was apprehended at the airport with about $3 million, which she claimed was sourced from Bureau De Change (BDC); she was alleged to also be the account officer for Akwa Ibom State's account with Bank PHB.   Later in October 2010, a Nigerian family was also apprehended at a London airport with over £500,000.   In a statement on the 3rd of November 2010, the incumbent CBN Corporate Affairs Manager, Mohammed Abdulahi, noted that 'CBN had been inundated with complaints from foreign countries that some Nigerian travellers indulge in cross boarder transportation of large sums of foreign currencies in cash, and that Nigerian Customs Service's returns show that large amounts of up to $3 million cash had been taken out of Nigeria by individuals in single trips.'   (See business Punch 4/11/2010, pg. 15).

The more recent series of arrests confirm that currency smuggling and money laundering are still thriving businesses in Nigeria.   However, CBN's sanctimonious posturing may just have been a subtle form of image laundering for the apex bank, whose misguided policies liberally fund the foreign exchange sources for currency traffickers, smugglers and money launderers.  

The truth, of course, is that the huge sums of moneys trafficked were most certainly purchased from various BDCs, to whom CBN regularly disburses hundreds of millions of dollars every month!   Indeed, liberal market dollar supply was one of the policy support instruments demanded by the IMF and the London and Paris Credit Clubs before Nigeria's controversial debt exit, which fleeced over $12bn from our tattered pockets in 2006, in the name of debt relief.  

Our monetary authorities had cleverly put a positive spin on this IMF directive, by suggesting that such free dollar supply would reduce the existing huge gap between the official and the black market rates of exchange.   Although the black market and the official rates are much closer, some analysts believe that the liberal supply of public sector dollars to BDCs for better exchange rate management may, in reality, be akin to smashing a cockroach on a glass table with a sledge hammer, when a less destructive repellant or insecticide could have been applied.

Incidentally, the difference between official and black market exchange rates continue to be between N5 and N10, a margin, which is still attractive enough to encourage underhand practices in the banks.   In successful economies everywhere, it would be apocryphal for public sector dollars to be liberally sold to BDCs, whose cash flows are traditionally derived from the itinerant tourist market.

The recent EFCC arrests suggest that BDCs may have graduated from merely meeting the retail requirements of travellers to becoming hard-core suppliers of foreign exchange to major money launderers and smugglers!   In other words, CBN's ill-advised liberal dollar allocations have become a supportive tool for national economic sabotage!   For example, the near collapse of our industrial landscape is partly the result of the porous inflow of contrabands from aggressive industrial economies.

Similarly, the motivation for money laundering and currency trafficking is facilitated by free access to public sector dollars made available to BDCs by CBN.   Ultimately, the adoption of IMF's conditionality on liberal dollar supply to BDCs has evidently done much harm to the economy.   This much was made evident in the past, in several of our articles in this regard, see for example, 'Banks and Money Laundering' in September 2009 and 'Funding Smuggling and Money Laundering from BDCs' in August 2011 at www.lesleba.com.

It seems paradoxical, therefore, that the apex bank, which has the mandate for engendering price stability and sustaining industrial regeneration and the promotion of increasing employment opportunities is actually the villain of our industrial and economic backwardness and the deepening poverty of our people.    

It remains inexplicable that the IMF did not recommend that the issue of multiple exchange rates, a weaker naira, spiralling inflation and stagnant economy could be more benignly resolved if CBN's monopoly of the foreign exchange market is immediately dismantled.  

Such a positive policy direction would transfigure our decrepit industrial climate and stimulate employment opportunities nationwide.   National debt accumulation would rescind and the banks would have no option than to aggressively seek the patronage of the real sector; the crowding out of the real sector by lucrative government borrowings from the banks would cease and inevitably, cost of borrowing to the real sector would fall to the industrially supportive level of lower single digit rate of interest.   In addition, the welfare of the common man would become significantly enhanced by the stronger purchasing value of the naira in his pocket, as inflation rate plummets to lower single digit level.

Instructively also, fuel prices will tumble and the oppressive burden of fuel subsidies will evaporate,   as fuel prices collapse in consonance with a rising naira value, which would in turn create increasing purchasing power and demand for all income earners, particularly the poor.   Invariably, such increased demand would stimulate increasing industrial consolidation and create humongous employment opportunities, which would absorb the energies of our otherwise idle youth population and ultimately reduce the prospect of insecurity nationwide.

 
SAVE THE NAIRA, SAVE NIGERIANS!!
 
BY: LES LEBA