Nigerian Senate Reacts to Bill Empowering CBN to Create New FX Market, Stabilise Naira-Dollar Value
- A bill intended to establish a foreign exchange market in Nigeria was defeated by the Nigerian Senate
- According to Senator Sani Musa, the proposed law was intended to cover related topics such as controlling and overseeing market activities
- The new bill was expected to give CBN power to establish the basic exchange rate for the purchase and selling of forex
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.
The Nigerian Senate rejected a bill that aimed to create a foreign exchange market in the country.
Source: UGC
The bill, sponsored by Senator Sani Musa (APC-Niger East), the chairman of the Senate committee on finance, also aims to establish regulations for the management, oversight, and supervision of transactions carried out in the foreign exchange market.
ThisDay reported that the bill, titled "the Foreign Exchange (Control and Monitoring) Bill, 2024 (SB. 353),” was read aloud for the first time on Tuesday, February 20, 2024.
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According to Musa, the proposed law would include similar subjects in addition to regulating, monitoring, and supervising market activity.
He claimed that attempting to maintain an equilibrium in the balance of foreign payments and speeding up international transactions would also contribute to the healthy growth of the national economy.
He said:
“The bill seeks to stabilise the value of the currency by ensuring the liberalisation of foreign exchange transactions to maintain an equilibrium of the balance of international payments.
“It will also stabilise the value of currency by ensuring the liberalisation of foreign exchange transactions and of other foreign transactions by revitalising market functionality.
“The bill attempts to expand Section (1) of the existing Act to incorporate three new provisions to make for clarity and to empower the Central Bank of Nigeria to administer, control and manage all dealings and transactions in relation to foreign exchange matters.
More power to CBN
He added that the recently inserted terms will allow the CBN to ascertain the fundamental exchange rate for purchasing and selling foreign exchange.
He pointed out that the bill's clause 6 adds new subclauses (2), (4), and (5), which mandate that authorised dealers report to the CBN the sources and uses of foreign exchange exceeding USD 10,000.
He added:
When seeking to import foreign currency notes.
“Part Ill of the bill makes elaborate provisions for the grant of a licence to carry on business dealings in foreign exchange. In this part, provisions were made for refusal of licence, suspension or revocation of licence, review and appeal.
“Clause 18 (1) (a) and (b) were added to expand the scope of dealers in the market and where funds are purchased from the bank. The market rate may be subject to rules and regulations prescribed by the bank.”
Musa added that the bill stipulates that the domiciliary account must be operated in accordance with the bank's guidelines and that the CBN now has more authority to specify how foreign exchange may be used to pay for goods and services in Nigeria.
Musa claims that if the bill is signed into law, it will support the healthy growth of the national economy, make international trade easier, and—above all—stabilize the value of the currency by guaranteeing the liberalization of international trade and reviving market efficiency.
Lawmakers react to bill on FX, CBN
But reacting, majority of the senators conveyed their concerns that any legislation aimed at overseeing or managing the foreign currency market's operations beyond the scope of the CBN's work would backfire.
The house rejected Senate President Godswill Akpabio's request that Musa withdraw the proposed legislation so that more discussions could take place.
The majority of federal MPs voted against Akpabio's request for a voice vote to decide whether to approve or reject it for a second reading.
CBN shows $9bn drop in forex demand
Legit.ng earlier reported that the demand for foreign exchange by individuals and companies engaged in importation and other forex-related activities decreased by 42% year-on-year.
The total sectoral utilisation of foreign exchange indicated that 19 sectors and services received $21.12 billion in forex allocations in 2023.
This represented a 41.9% decline, or $8.87 billion, compared to the $29.98 billion allocated in 2022.
Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.
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