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CBN clarifies position on illicit currency conversion

By Geoff Iyatse
22 July 2022   |   2:45 am
The Central Bank of Nigeria (CBN) has clarified the warning issued by its Governor, Godwin Emefiele, on the illicit conversion of currency. It noted that the caution does not apply


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The Central Bank of Nigeria (CBN) has clarified the warning issued by its Governor, Godwin Emefiele, on the illicit conversion of currency. It noted that the caution does not apply to those exchanging currencies for legitimate purposes but to individuals seeking to convert naira in their accounts into foreign exchange (FX) for political campaign purposes.

At the post-Monetary Policy Committee (MPC) meeting briefing, Emefiele warned politicians attempting to withdraw naira in exchange for dollars, insisting that they would face the wrath of the law as such action is illegal.

In a media chat, its Director, Corporate Communications Department, Osita Nwanisobi, said the clarification was necessary following what he described as an attempt to deliberately misrepresent the Governor’s caution against electioneering spending and speculative activities.

According to Nwanisobi, the warning by the CBN Governor was to those who seek to convert the local currency from their accounts into FX for election campaigns and not those who need dollars for justifiable reasons such as payment for tuition and other personal expenses.

Reiterating the position of the bank, the spokesperson said the CBN also frowned at the conduct of unauthorised movement of funds within and outside the country and was determined to invoke necessary provisions of the law to check the movement of illicit funds.

Maintaining that the apex bank, in line with its mandate, has discretionary power to prevent persons from conducting illegal transactions, Nwanisobi said the CBN was within its statutory limits to mop up the excess liquidity in the vaults of the institutions it regulates to stem speculative activities.

He urged customers not to get involved in unauthorised movement of funds for currency conversion to guard against breaking relevant laws.

Nwanisobi also called on Nigerians to be more patriotic to preserve the value of naira, noting that it is the duty of every citizen to support the CBN in this regard.

Meanwhile, naira continues on an extremely volatile path at the black market and peer-to-peer window, hitting an all-time low (ATL) of N650 to a dollar at the latter as of yesterday. Parallel market rates are still far above N600/$, raising doubt if the dollar would retreat to below N600 at the window anytime soon.

The rising value of the dollar at the international market may be reflected in the local currency market. The US Dollar Index (DXY), a metric for measuring the value of dollars against a basket of other currencies, has remained bullish in the past few weeks.

Recently, it hit 108 points, the highest since 2002. It eased in the week but started uptick movement on Wednesday as concern over monetary tightening and rate hike spree resumed.

Yesterday, The European Central Bank (ECB) joined the hawkish path, increasing interest rates for the first time in 11 years in an attempt to cool surging inflation in the eurozone.

The monetary authority of the 19 countries that use the euro surprised markets by pushing its benchmark rate up by 50 basis points to bring its deposit rate to zero.

Analysts had expected 25 basis points from the bank, which had remained relatively lethargic in the face of a rate hike spree.

The Federal Reserve System, from March to June, raised interest rates three times by a combined margin of 150 basis points. Some analysts said another one per cent increase could be on the table as the Federal Open Market Committee (FOMC) meets next week.