In its bid to shore up Nigeria’s foreign exchange earnings, Central Bank of Nigeria said it will enforce the repatriation of dollar-proceeds from exports will impose sanctions against exporters that do not comply.
CBN Governor Mr. Godwin Emefiele said in London yesterday. He also said that the CBN will not reopen the rWDAS window saying “The window is not closed. It is crushed and destroyed for life. “Nothing is going to be opened again. We are not going to go back to a subsidised regime.”
“If you refuse to sell your export proceeds that you repatriate in the foreign exchange market … we will ban them from accessing foreign exchange in the Nigerian foreign exchange market,” Emefiele told Reuters in an interview.
Emefiele said much of the pressure on the naira over the past year was due to activity of importers and exporters, the former frontloading purchases of hard currency while the latter were hoarding their overseas cash earnings.
The resulting hiatus on the currency markets has forced the central bank to intervene, and this has led to a steep drop in Nigeria’s foreign cash reserves to four to five months’ worth of imports.
He said that forcing exporting and importing companies to comply with existing regulations on their use of the currency market was now necessary.
According to him “Another thing we will do is that we will ask the banks not to loan money to them (exporters who don’t 1epatriate hard cash on time),”, saying the measure would come into effect soon, but declining to give a date.
Emefiele estimated that some $3-4 billion of proceeds due to be repatriated were outstanding, of which 40 percent would come from oil companies. “We are saying … don’t put your foreign exchange in the hands of people who want to carry cash and take it abroad,” he said. “Use it to import tangible items that are documented.”
CBN plan to sanction exporters is to stop the practice of capital flight through export of Nigeria produce by companies operating in Nigeria. Many exporters have kept the proceeds of their export abroad thus denying the nation access to autonomous foreign exchange earnings.
Nigeria’s economy has been hit hard over the past year by a steep drop in oil prices and political uncertainty over Presidential delayed election. The development has seen the naira lose more than 20 per cent value against the dollar since the middle of 2014, breaking through the important 200 per dollar level last month as it racked up the biggest monthly loss in more than five years.
In February, the central bank introduced trading rules under which banks will be able to purchase foreign exchange only if they have a prior order from a corporate customer, such as a fuel importer or foreign mobile phone company looking to repatriate profits or dividends.
CBN is looking at exporters to ensure hard currency liquidity within Nigeria, pondering sanctions against exporters who fail to repatriate proceeds and funnel them back into the official market within the stipulated 90-day limit, Emefiele said.