Summary And Indepth Analysis Of The CBN Naira For Dollar Scheme, By Peter C J


~ another failure-on-arrival policy?

Nigerians woke up today to a new Promotional Scheme by the CBN on Foreign Exchange (Forex) Remittances from diaspora. In summary, if you receive $100 dollar from that Uncle abroad, CBN, through the receiving Commercial Bank, will pay you $100, and an additional N500 for your troubles, that’s of course, if you get in the money through CBN Licenced International Money Transfer Operator (IMTO). According to the CBN, this is to encourage  (Forex) inflow into the country.

While this may sound like a well thought out policy, I cannot help but ask myself some questions, and wonder if the policy is going to help Nigeria and Nigerians, or leave us worse off than we currently are…

First of all, why is the CBN so eager to exchange the Dollar for more N5 than the current rate. Worse still, is that it appears and sounds like an unaccounted-for Subsidy, especially when you consider that the recipient has the option of collecting the money as Cash and walking away to the parallel market for exchange. It would had made more sense, if such remittances, are compulsorily acquired by the CBN through Commercial banks at an additional N5 cost. That way, we can be sure (or assume, at least) that the money is redirected to funding #Critical Trade Obligations of the Country. 

Another issue of concern is the Framework for Implementation and Monitoring. This is critical since we know how “notorious” Nigerians can be when capitalizing on faulty Government Policies. Since Nonso can collect the Dollar recieved as Cash, what is the Framework in place to ensure that he doesn’t go to one Mallam in the market, who finds a way of sending back the money abroad (don’t ask me how), and then it is remitted back again, just like the Water Cycle of elementary science. I think there’s a name for it. Aha! #RoundTripping. In the end, the CBN might just be paying out N5/dollar for monies that have zero impact on the Economy, resulting in further wastage. 

Okay, so Nigeria is now doing Promo? Buy $1, get N5 free. Let me ask you:

~when was the last time #Heineken asked you to look under your crown cork for recharge card?

~when was the last time #Budweiser told you to assemble and spell something with your crown cork to win a car?

~do you know anyone that won that 7up DAEWOO promo, or that Coca-cola N1m promo?

The point is that no sound brand does promo, and when seemingly sound brands pretend to do promo, it is just a scam (borne out of desperation) to boost sales, or risk folding… Is that what Nigeria is doing through CBN? Is Nigeria going to fold anytime soon? Well, technically, a country cannot fold, but things can get so bad her citizen’s lives begin to fold. Is that where we are headed with this Promo? Just know it, as a rule of the thumb, that the day they start doing Promo, that’s the day things had gotten out of hands, and without that promo, things could just flip.

Is Nigeria, through this policy, #Filling the hole of the #EconomicMess she’s in, or is the country digging the hole deeper and deeper and deeper. In the era of failed banks, when regulation was weak, part of the signs that a bank is going down, is when that bank starts taking deposit and paying interests at rates far above industry average. The idea usually is to get in enough #Liability to cover up for eroded #ShareHoldersFunds. But we all know it never works, because that strategy further digs the hole, instead of filling it. Yes, Nigeria might not fold, but the signed of a folded Country is in the number of companies and businesses that either fold or migrate to other countries. Nigeria has been folding up for a long time, just that they will not let you know. They window-dress a lot. So, why is the CBN behaving like a Financially Insulvent Commercial Bank? Why are they willing to give you N5/$ for money you can send out and back in again without impacting the economy? Sounds like someone is Desperate to cover Erodded #ShareHoldersFunds, in this case, our National Cake!

In 2018, some $20.1 billion was sent to Nigeria (officially). That’s about some $1.67 billion monthly (for simplicity sake). That figure has since increased in 2020, and with this one month “promo” is expected to hit some $3.5 billion in the next one month alone. N5 on $3.5b, is a whooping N18 billion. With round tripping, it could go as high as N30billion. That’s the estimated amount of money to be shared to people for remitting Dollar to Nigeria.   Wahala for who no get relation abroad. 

In what ways can Nigeria employ N30 Billion so as to achieve same goals? I don’t know, but…

~ Just imagine what N30b will do to Ajaokuta Steel Industry if well utilized? We can export Steel and Earn Foreign Exchange.

~ Just imagine if N30b was genuinely used to commercialise agriculture in Nigeria, with accompanying processing and storage facilities, we will feed West Africa and Earn Forex.

~imagine if N30b was genuinely used to boost the real sector, we will produce most of what we struggle to import with the limited Forex that we have, and channel the rest to more productive sectors of the economy. 

~N30b, if pumped into our textile industry, will ensure we save the money spent on importing textile from China

N30 billion can enter many places and help us achieve a lot: Education, Real Sector, Security, Oil and Gas, etc, but, like a failing commercial bank, we would rather take deposit at high cost than inject fresh share holders funds; we rather throw away N30billion in a month, than change the leadership of the failing bank (in this case, Buhari and his cabinet).

Like every private venture, profit remains tops on their agenda, not minding whose oxen are gored. That’s also part of why they will not speak up. That’s also part of why they are so quick to send out juicy looking advert of this “Promo”, despite the lame-sounding and weak-looking letter from CBN. If it was such a great strategy, why did the banks not implement this strategy on their own ever since, after all CBN also pays compensation on Forex held by Commercial Banks. Tomorrow is Monday, there will be Marketing Meetings, Branch Meetings, Zonal Meetings, Exco Meetings, and this “promo” will top the agenda. Wahala for Bank Staff wey no know  person wey get person wey dey send money from Abroad. It appears there will be a shift from Donor Agency Monies to Diaspora Remittances. Why not, even CBN compensates Commerical Banks more for holding Dollar than for holding the Naira. 

But watch it, wise banks, banks led by knowledgeable and sensible people, will shy away from funding Foreign Exchange Denominated Transactions and Credits, while the JP Morgan Chase of this world will squeeze the Dollar Lines available to Nigerian Commerical Banks. Trade will suffer, prices will further go up, and the government will lie to us again.

In the end, it is me and you that will suffer. We will shout and scream at the rising cost of things. We will listen to Government as they blame it on COVID-19. 

In the end, it is us, that pays the price of their ineptitude.

Hope I am wrong! –
copied from  PETER C J

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