Operators Criticise Move to Ban Foreign Currencies for Transactions

18 Feb 2013

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By Obinna Chima
Operators in the financial market have condemned the resolution by the House of Representatives to compel the Central Bank of Nigeria (CBN) to ban the use of the United States’ dollar and other foreign currencies for local transactions.

The financial market experts, who spoke with THISDAY at the weekend, described money as a store of value, saying that people would prefer to hold any currency whose value is relatively stable.

The resolution by the lawmakers was a result of a motion brought before the House by Hon. Nadu Karibo, a member of the Peoples Democratic Party (PDP) from Bayelsa State.

Karibo had argued that the dollar was fast displacing the naira as a means of exchange in Nigeria. He had also said that the trend of using foreign currencies instead of the local currency for the payment of domestic transactions was weakening the naira and should be stopped before the local currency becomes worthless.

But Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, described the proposal of the lawmakers as “a joke.”

Rewane added: “Money is a store of value and you cannot compel people not to use whatever currency they want to use. That is not possible.”
Also, the President, Finance Houses Association of Nigeria (FHAN), Mr. Samuel Durojaye, pointed out that the resolution showed that the lawmakers were concerned about the need to strengthen the naira. He however stressed that the use of dollar or other foreign currencies was not something that could be legislated on.

Durojaye explained: “It is a good move, but it is not something that should be legislated on. Ordinarily, if the economy is doing well and we have a very strong industrial base, the naira will be strong compared to the dollar or other foreign currencies and people will prefer to hold the naira more.

“But today, people feel safe to hold dollars, pounds, euro as a store of value. People feel that these foreign currencies are better store of value against the naira. Most of the goods in the country are imported because our economy is weak and these transactions are done in foreign currencies.

“So when these importers collect dollars or other foreign currencies, they know that whenever they want to import goods, it is any of these foreign currencies that will be used. But if they collect naira, whenever they want to import their goods, they will have to convert the local currency to the foreign currency.”

Durojaye urged the CBN and Ministry of Finance to initiate policies that would reinvigorate ailing industries and strengthen the country’s production base.

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