Dear Advocate of Reasoning,
Welcome to another edition of this week’s newsletter. In this edition, we would like to delve into the recent policy shift by the Central Bank of Nigeria (CBN) concerning international money transfer operations, particularly the directive for commercial banks to convert customers’ dollars from abroad to naira. This move has sparked concerns, as it appears to impede on the very principles of financial freedom.
Currently, most commercial banks in the country have started implementing the policy as they are set to be converting customers’ remittances from abroad to naira. Not only that, in the requirement also, CBN placed a ban on the dollar and other foreign currency payouts for international transactions received through IMTOs.
One of the Nigerian banks, ECOBANK PLC’s message sent to customers as seen, revealed:
“Dear Valued Customer, we would like to bring to your attention recent regulatory changes affecting international money transfers into Nigeria. With regards to the Circular issued by the Central Bank of Nigeria (CBN) dated January 31, 2024, all in-bound money transfers to Nigeria will be paid only in Naira through a bank account or in cash at the prevailing rate in the Nigerian Foreign Exchange Market.
“Furthermore, transfers exceeding the equivalent of $200 must be credited to the recipient’s bank account while cash payments for amounts below $200 will require an acceptable means of identification. The acceptable means of identification is listed as follows: International passport, Driver’s license, National Identity card, INEC Permanent Voters Card (PVC).”
According to the CBN, the policy is meant to boost forex supply and starve the black market traders. But in reality, the potential repercussions the policy will have on businesses cannot be overlooked. Many enterprises rely on international transactions to thrive, and a rigid currency conversion policy will indeed disrupt their operations.
Firstly, the CBN’s decision seems unreasonable given the potential adverse effects on the purchasing power of individuals. Converting dollars to naira at a fixed rate set by commercial banks can lead to a lack of competitiveness in the foreign exchange market. This fixed rate denies individuals the opportunity to capitalize on favorable exchange rates and hampers their ability to make informed financial decisions that align with their best interests.
Moreover, this policy undermines the fundamental concept of financial autonomy as the CBN is restricting the freedom of individuals to manage their finances in a way that suits their unique circumstances. The essence of financial freedom lies in the ability to make choices aligned with personal interests and goals, and this new policy appears to curtail that autonomy.
Additionally, this policy may inadvertently discourage foreign investments and remittances, which are crucial contributors to the country’s economic growth. Imposing restrictions on the free flow of foreign currency signals risks; the CBN risks deterring international investors and limiting the inflow of remittances, both of which are essential for a vibrant and dynamic economy.
As Liberalists, we stand for principles that champion individual freedoms, financial autonomy, and transparent governance. We hope you had reason with us on this. I am Hammed J. Sulaiman and that’s all from us for now. For more, you can continue catching up with us on X.