CBN goes tough on politicians over dollar spending

… May roll out new rules on BDCs

Central Bank of Nigeria (CBN) yesterday condemned the arbitrary use of the dollar as against the naira in the country by the politicians, saying that its new policies would be issued soon to curtail this arbitrage.

Speaking Tuesday at the end of the Monetary Policy Committee (MPC) meeting in Abuja, CBN Governor, Mallam Sanusi Lamido Sanusi, said that the committee was satisfied with actions taken at the last MPC, and therefore, decided to hold the Monetary Policy Rate (MPR) at 12 per cent. Whereas Cash Reserve Requirement (CRR) on public sector funds was retained at 50 per cent, CRR on private sector deposits was also retained at 12 per cent.

According to him, the situation where the dollar is now a pilot currency and Nigeria now the biggest importer of US dollar, is unacceptable and CBN has no choice than to deal with it.

“We have to stop this situation where the dollar has become the pilot currency and Nigeria has become the biggest importer of US dollar cash in the world. In the next few weeks you will see a series of policies from our side and I know that there will be a lot of resistance. But again, what is new?” he asked.

Again, he said that CBN would reduce the amount of dollar cash going through the Bureau d’Changes with a view to checking arbitrage.

“We will come out with policies in the near future. I am not going to tell you the details of what we are looking at. You must remember that one of the challenges we have is policies are getting the way of each other. We need to stop the money laundering. We need to reduce the amount of dollar cash going through BDCs. At the same time we need to make sure we don’t become a multiple exchange rate regime and have spikes that will create too much room for arbitrage. So, there has to be a whole set of policies that are looked at very carefully and that are pursued with a lot of determination. So, we think there is something absolutely wrong with Bureau d’Change buying hundreds of millions of dollars that cannot be accounted for. I think that these monies have not been used for the importation of goods and services. We think it is a part of money laundering exercise and we have to deal with it. We also think that the whole policies around cash, around massive withdrawals of cash and deposits of cash and encouraging electronic payments should now move from naira to dollars” he noted.

On prices, the CBN said inflationary pressures continued to moderate in response to the tight stance of monetary policy.

Headline inflation, he said, declined from 8.7 per cent in July to 8.2 per cent in August. Food inflation declined to 9.7 per cent in August from 10 per cent in July while core inflation rose slightly to 7.2 per cent in August from 6.6 per cent in July.

Sanusi stated that the committee was satisfied that overall, headline inflation has remained below 10.0 per cent for eight (8) straight months and represented the lowest level achieved over the past five years, the longest such stretch since 2008; and that the six-month inflation outlook indicates that inflation would remain within single digit range.