President Muhammadu Buhari has said that banks, importers and individuals involved in round-tripping of dollars they buy from the Central Bank of Nigeria’s (CBN) official market and resell in the parallel market will be made to face the law when caught.
The president gave the warning in an interview monitored on Al Jazeera television at the weekend.
Forex round-tripping or arbitrage refers to a process whereby funds obtained from the official forex market (at lower rates) and diverted to other markets and sold at a higher rate by forex dealer, banks and end users.
There has been strong suspicion that some banks and other end users that get weekly forex allocations from the CBN divert some of the dollar cash to the parallel market because of the wide gap between the official and parallel markets.
In his response to a question on alleged round-tripping in the forex market, the president said: “I agree with you, but we are going to check that and we are going to apply sanctions to anybody that is given dollars by the central bank for the importation of essential raw materials, for example pharmaceutical products, and because he can make N100 more, goes to the parallel market to sell it. We will pursue them and obviously would punish them.”
The CBN Governor, Mr. Godwin Ifeanyi Emefiele, recently said the central bank was on the lookout to penalise banks found in such unhealthy practice.
He also warned that if any bank was caught in the act, it is not just the institution that would be penalised, its management would also be severely punished.
Continuing, Buhari reiterated his stance against the devaluation of the naira, maintaining that “countries that play around with their currencies are countries that have enormous production capacity”.
“They have factories in place, they have infrastructure in terms of power, and their communications and security are actually perfect,” he said.
According to him, Nigeria virtually imports everything, from rice to toothpicks, adding: “If we don’t have the money for importing those things, what is the value in further devaluing the naira?”
He pointed out that in terms of the country’s exchange rate policy, national interest supersedes the interest of multilateral agencies such as the International Monetary Fund (IMF)?
“If it is against our national interest, why can’t we go against the IMF’s advice? Nigeria can only afford to live within its means. If we don’t have the money to back the naira for people to buy the dollars and import toothpicks, chocolates, rice, glamorous dresses,” he said.
When reminded that there were some essential items such as the importation of pharmaceutical drugs that are also being starved of forex, he said: “We have pharmaceutical companies in Nigeria.
“Once upon a time we did what was called institutional strengthening by giving them monies to import machinery and essential raw materials.
“We have already given instructions for the ministries to find out which industries need foreign exchange on a quarterly basis to produce those items that are essential, like pharmaceuticals as you said, but certainly, not to import rice.”
Responding to a question on the anomalies detected in the 2016 Appropriation Bill, the president, who pointed out that drawing up budget estimates involves technocrats, did not rule out the fact that there could be men and women in some ministries, departments and agencies that are working against his government.
“Basically you know producing the budget involves technocrats. I would like people to assess Nigeria, especially this government on where we found ourselves.
“When we came in, there were 42 ministries and we found out that the economy cannot take all 42 ministries and we reduced them to 24. The permanent secretaries, who are the heads of the ministries as technocrats, 21 of them were removed.
“So, people who want to be fair to us should sit down and reflect – the ministries, the permanent secretaries were taken over after eight successive administrations.
“We cannot assume that from the permanent secretaries downwards, they are 100 per cent loyal to the new government. But we would apply sanctions. But since the budget is at the National Assembly, I don’t want to talk more about that now,” he added.
He also urged member countries of the Organisation of Petroleum Exporting Countries (OPEC) to work together to save oil producers from the present situation in the market.
“OPEC has to work together to save the situation. If you can produce less and earn more, why produce more and earn less? I have never been able to understand that, but the market forces are influenced by a lot of political decisions, both regional and global, and we have to live by it.
“OPEC as an organisation has to be mindful of the economic conditions in each member country because that is what will influence that country’s ability to go along with OPEC’s decisions.
“For Nigeria, we were unable to diversify our economy, hence we are much more disadvantaged by the low oil prices. OPEC may try to help us, but clearly, it was basically our fault.
“In OPEC, there are individual national interests: there are regional interests and there is OPEC’s interest. On top of that there are global interests. Large producers like Russia, which are not in OPEC are swing producers. If Russia decides to go flat, it can disorganise OPEC’S principle of controlled production.
“Certainly, under my leadership, Nigeria will not withdraw from OPEC. Between 1976 and 1979, I served as petroleum minister and I valued OPEC as an institution and I think Nigeria will make the necessary sacrifice to remain in OPEC,” he said.
The president also said high demand for forex by parents of students studying abroad had put pressure on the naira, stating that any parent who can afford foreign education, should go ahead to source for forex from autonomous sources.
According to him, “Those who can afford foreign education for their children can go ahead, but Nigeria cannot afford to allocate foreign exchange for those who decide to train their children outside the country. We can’t just afford it. That is the true situation we are in.”
The president’s remark on the possible review of forex sales for foreign tuition conflicted with the CBN’s statement three weeks ago when it allayed fears that it was going to stop the sale of forex for school fees.
The central bank’s statement came on the heels of the last meeting of the Bankers’ Committee where bank chief executives had expressed concern over spiralling demand for forex for school tuition oversees. However, no decision was taken on the issue at the meeting.
The statement by the Bankers’ Committee caused jitters in the forex market, as parents rushed to buy as much dollars as they could get, leading to increased pressure on the naira which depreciated by several percentage points to over N400 to the dollar in a space of one week and forced the central bank to issue the statement to douse concerns among millions of Nigerian parents.
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