Let Cbn’s New Forex Policy Be
Two weeks ago, I got home from the office one night and feigned extreme happiness. My wife was curious and asked me what the matter was. As we usually joked, she asked if I had been “nominated as the next president of the federal republic.” Not coming out straight, I told her that the Central Bank of Nigeria (CBN) had not only spoilt her show but also made my day, having taken measures to save me some money. Now more curious, my wife asked what happened.
With a mischievous smile, I told her that the CBN had banned the use of Naira credit/debit cards abroad. Not immediately understanding where I was coming from, I told her that I had good excuse not to buy plenty gifts whenever I was opportune to travel abroad, since, with limited cash/travellers cheque/dollar debit card, I could only afford to buy a few things. She got the message and called me “Alaroro” (someone who does not like to spend money).
The CBN forex policy on use of Naira debit card abroad may hurt, but it does save families and the country some money. Yes, with the ban of the use of Naira debit cards outside the country, Nigerians have been saved the spend-thrift mentally and characteristics, which they exhibit when they travel abroad. Indeed, you need to see how Nigerians spend money in United Kingdom, United States of America, South Africa and United Arab Emirate (Dubai) shops. In these countries, anybody who is doing huge shopping, whose cart is overflowing with items, is most likely to be a Nigerian. Owing to the way they spend money, Nigerians have become notorious.
I won't forget an experience I once had at the Heathrow Airport, London, while waiting for a connecting flight to Lagos. To while away time, I had gone window shopping. At one of the shops at the airport, while examining one item I can't remember now, one of the shop attendants approached me and we got talking. When the lady learnt that I was from Nigeria, there was an unusual excitement. Smiling widely, she said: “I like Nigerians. They spend lots of money.” Not sure if this was a compliment or a mockery, I asked what she meant. The lady said Nigerians buy a lot at the airport departure lounge, which, she said, gives the impression that our people are rich. Well, since I eventually did not buy anything at the shop, I thought that, perhaps, the lady attendant would be thinking that I was a tight-fisted Nigerian.
Well, as shop attendants in Europe, America and Dubai are happy that Nigerians spend huge amount of money in shopping, the country's foreign reserves bleed. I understand that at a time, not long ago, the aggregate expenses of Nigerians, using Naira debit cards abroad, averaged about $100 million daily across the world. What happens is that as Naira debit cards are swiped abroad, to pay for one thing or another, Visa or Master cards institutions contact Nigerian banks for payment in foreign currency, which in turn run to the CBN for the defray of the debt, as it were. CBN then pays from the country's external reverses, since the debit cards used are in Naira and not Dollars, Pound Sterling, Euro, Rand or whatever currency the countries where Nigerians make purchases use. And CBN has said that if this continues, the foreign reserves will run out in no time.
One thing that is for sure is that it is easy to spend money using debit cards, since, as long as there is money in the account, the temptation of spending money on things that one could forgone if one does not have cash, is usually high. But if those who travel abroad for summer holiday use cash/travellers cheques, which have limit, their expenses will reduce. Some people would say that the $4, 000 Personal Travel Allowance (PTA) and $5, 000 Business Travel Allowance (BTA) or its equivalent in Pounds Sterling each traveller (for leisure or business) is entitled to for a quarter is meagre, they would spend less. However, it must be said that one could still pay for hotel abroad from Nigeria, using debit card before travelling, which reduces expenses abroad to, perhaps, transportation, feeding and little shopping.
Stringent as the CBN forex regime is, I am persuaded that it is the best policy for now, with the failing of the economy. Those who are shouting over the CBN's decision not to allocate forex for the importation of certain items are crying wolf where there is now. I wonder if these people really mean well for Nigeria. Why would Nigeria be spending forex to import eggs from South Africa, for example, which was happening before? Egg of all items? Why would the country spend foreign exchange to import toothpick? Which serious country will encourage the allocation of forex for the importation of matches to light fire? Why would Nigeria spend hard earned forex on the importation of pencils? Why do we continue to spend forex on rice importation when the Federal Government is working to make the country a huge rice producer? These items are things that should ordinarily be produced in the country. There are eggs in Nigerian poultries across the country. There are trees and palm fronds in Nigeria to produce toothpicks. And as the Minister of Science and Technology, Dr. Ogbonnaya Onu, said, Nigeria should be producing pencils, not importing them. If CBN stops allocating forex for the importation of these items, it is to encourage local production. And we know that the CBN and the Bank of Industries (BoI) are ready to help those who want to go into industrialisation and local production. If we stop importing, therefore, Nigeria will gradually shift to exporting nation, as not all the things produced here would be used locally. Some of them will certainly be exported to other countries, even if it is neighbouring West African nations, and the country will earn foreign exchange, which will reflate the foreign reserves.
Again, the control of the exchange rate cannot be a bad idea. At a time of control, the exchange rate rose to all time high of N280 to one dollar. I bet that if the exchange rate is left for market forces to decide its fate or rate, it would get as high as N500 to a dollar. I do not see the CBN decision to control the exchange rate out of place. And I do not see this measure as anti-foreign investment. The economy is in a mess. If the exchange rate goes above the roof, the Naira will become worthless. A worthless Naira would only worsen the situation. What will help the Naira is when the demand for forex reduces, whether it is for the importation of things we could produce or summer holidays abroad. When Malaysia had similar problem as Nigeria at present, it took actions that were close to what Nigeria has. The country stopped importation, for instance, for some months, among others, within which its economy bounced back.
It is only a mischief maker that would condemn the CBN reduction of allocation to Bureau the Change (BDC). I have discovered that it is only in Nigeria that we see people hawking Dollars, Pounds Sterling and other foreign currencies in the street. It's really absurd that in the street of Kano, Lagos, Abuja and others, as well as around the international airports, people sell forex like groundnut. In other countries, there are BDCs, but as a foreigner, for you to exchange your foreign currency to the local currency, there are some processes that must be followed. First, you must present your International Passport, which would be photocopied. And a receipt would be issued. But here, our BDCs are in the street. You walk in and make your exchanges and walk out without any record. No economy functions like this. Such system encourages money laundering and easy smuggling of drug or corruption-produced funds.
However, while I support the CBN on the forex policy, there is need for the apex bank to also take measures to ensure that local banks are also complying. The onus is on CBN to ensure that those who legitimately want BTA/PTA get them at the banks, as they are entitled to them. Those who want BTA/PTA have had raw deals at the banks. They usually do not get, which forces them to go to the black market for forex. CBN must give banks the BTA/PTA, while banks must give their customers, who want them.
It is also the responsibility of the CBN to ensure that Nigerians whose children are schooling abroad or have medical bills to pay abroad get the forex they require. I learnt that provision has been made for these, wherein the CBN transfers such money directly to the schools and hospitals. It is not a crime for Nigerian parents to decide that their children and wards should school abroad or to seek medical treatment abroad. It is a matter of choice and it may not have anything to do with the standard of schools or hospitals. It's a right, which should not be denied. Such people should get the forex they need, through the channel provided by the CBN. And the CBN must make the channel or process to work. It will be unfortunate if the CBN says provision has been made and the system does not function.
I feel strongly that Nigerians should support the CBN Governor, Mr. Godwin Emefiele, as he grapples with the forex administration and the bad economy. Just as President Muhammadu Buhari has given him support to do the needful to save the country's foreign reserves, in the main, Nigerians ought to also make sacrifices, to help. I also expect support from the National Assembly, not a move to stop the action. We should encourage local manufacturing and industrialisation to create jobs and make the economy run better. Governors and politicians, who prefer to carry and spend Dollars are part of the problem. They should repent. The CBN should also deny them such forex.
Written by Onuoha Ukeh.