Rumours about a memo purportedly sent to the foreign exchange trading desks of leading banks, widely shared on some social media platforms and which was subject of a debate on Twitter, indicates that there are moves to review the utilization of inflows into customers domiciliary accounts.
According to a report by Nairametrics, the said memo made several recommendations on utilization actions for different types of inflows of forex into the country.
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Under the category that addressed Offshore FX Inflows Local FX inflows (from other Nigerian banks), Internal account to account FX transfers (sourced from offshore inflows), it recommended that “Transfers to third parties are strictly prohibited”. This suggests inflows from abroad into your local account in Nigeria cannot be transferred to anyone else except you sell to the bank or transfer to yourself.
In another type of FX transfers, Internal account to account FX transfers (sourced from FX cash deposits) FX cash lodgment over the counter, it made the following recommendations.
- The origin and source of the FX deposit should be determined before customer can be credited to ascertain legitimacy
- FX cash lodgments should be lodged by only account holders and they can have unfettered access by telegraphic transfer up to a limit of $40,000.00 monthly for payment of medical bills, school fees, subscription to professional bodies, etc., subject to existing CBN guidelines
- Transfer from one customer to another is prohibited
- Transfer within related companies is allowed subject to a limit of $50,000.00 per month.
- Own use for eligible transfers and in cases as deemed by regulators (savings towards investments, etc.). This should be subject to regulatory limits and backed by signed instructions.
- Cash drawings.
According to the media report sampled in this write up, it is unclear if these directives have the backing of the CBN as the origin or the source of the letter cannot be verified at the time the article was written.
The truth of these rumours could not be ascertained by Investogist, but what is true is that this has happened before in a country across the Atlantic Ocean; Argentina.
What happened in Argentina in 2001?
In 2001, Argentina was in the midst of a crisis: heavily indebted, with an economy in complete stagnation (an almost three-year-long recession), and the exchange rate was fixed at one U. S. dollar per Argentine peso by law, which made exports uncompetitive and effectively deprived the state of having an independent monetary policy.
Many Argentines, but most especially companies, fearing an economic crash and possibly a devaluation, were transforming pesos to dollars and withdrawing them from the banks in large amounts, usually transferring them to foreign accounts (capital flight).
On December 1, 2001, in order to stop this draining from destroying the banking system, the government froze all bank accounts, initially for 90 days. Only a small amount of cash was allowed for withdrawal on a weekly basis (initially 250 Argentine pesos, then 300), and only from accounts denominated in pesos.
No withdrawals were allowed from accounts denominated in U.S. dollars, unless the owner agreed to convert the funds into pesos.
Operations using credit cards, debit cards, cheques and other means of payment could be conducted normally, but the lack of cash availability caused numerous problems for the general public and for businesses.
The President De la Rua resigned following riots in December, 2001, His vice president had already resigned months before. Adolfo Rodriguez Saa succeeded him, but he also resigned in the same month.
Eduardo Duhalde was appointed president on 2 January, 2020, and one of his first acts was to convert the funds denominated in US dollar into Argentine pesos at 1 peso = 1 US dollar exchange rate, while the exchange rate was liberalized (immediately going to 4 pesos = 1 US dollar).
What the rumours mean for Nigerians – According to Nairametrics
In recent days we have seen several internal leaks from banks recommending several measures aimed at curbing access to foreign exchange. For example, a text message purportedly shared by a bank and seen by Nairametrics for example stipulates that “customers can no longer effect FX transfers directly to third parties” explaining that customers can only “sell such funds to the banks”.
- The CBN is yet to comment on any of these memos and as far as we know has not issued any circular publicly to this effect.
- If this memo is true, then it suggests other banks are seriously considering capital controls that limit FX speculations in the hope that it will extinguish dollar demands.
Readers should be aware that there are a lot of fake information out there, Investogist have opted to report this because it believes that readers should know about it even if there is no way to authenticate the reliability of the information at this time.
Written by;
Nnamdi M.
