The Central Bank of Nigeria (CBN) has proposed a two -year jail term for authorised foreign exchange dealers that failed to make remittances to it in line with laws regulating the foreign exchange market.
The proposal was contained in a memorandum presented to the House of Representatives’ Committee on Banking and Currency, during the two-day public hearing on a bill for an Act to repeal the Foreign Exchange (Monitoring & Miscellaneous provision) Act, chapter F34, LFN, 2004 and enact the Foreign Exchange Act, 2017.
The bill also seeks to establish a foreign exchange market and provide for the regulation, monitoring and supervision of the transactions conducted in the market and for other related matters.
Speaking on the objectives of the bill, the Central Bank stressed the need to expand the bank’s role and authority for effective regulation of the forex market.
“It represents a milestone in the efforts to address the recent economic concerns of the country. We observed that considerable effort has been made in the bill to ensure that the Foreign Exchange (Monitoring & Miscellaneous provision) Act, was holistically reviewed by deleting superfluous provisions, including electronic transactions where appropriate, recognising the CBN as the regulator of the forex market and the main source of forex to the market; and projecting the use of the forex as a major monetary policy tool for national economic growth and development.
“Section 31(1) of the bill prohibits payment or acceptance of foreign currency for payment of goods and services in Nigeria, except as may be prescribed by the Bank. This proposal supports the provisions of Sections 20(1) and 5) of the CBN Act which are against the dollarization of the economy by emphasising that foreign currency shall not be paid or accepted for payment of goods and services in Nigeria”.
According to the Apex bank, the bill encourages foreign direct investment, by allowing the repatriation of funds. “It is our view that to a large extent, the bill meets its stated objectives as provided in section 1 thereof, to establish a foreign exchange market and create an enabling environment for regulation, monitoring and supervision of the market,” it said.
It further solicited for the inclusion of foreign notes and travelers cheques as part of instruments of transaction in the forex market, as proposed in section 4(2) of the bill as well as prescription of stiff sanction for erring authorised dealer who breached the regulations.
In Section 26(3), “we observed that failure, neglect or refusal to render returns by the authorised dealers/buyers is a criminal offence under the bill. However, the bill did not prescribe punishment for the offence. We proposed that a new subsection (4) should be inserted in the bill as follows: ‘authorised dealer/buyer convicted of an offence under subsection (3) of this section, shall in addition to revocation of its licence by the bank, be liable to a fine of not less than N2 million.”
Additionally, the bank called for the amendment of proposed section 27(3) which provides that “a person making an application to open a domiciliary account shall not be obliged to disclose the source of the foreign currency sought to be deposited in the account.”
To this end, the bank argued that the provision may be misconstrued to mean that freedom from obligations to disclose sources is only applicable in respect of funding for the establishment of the domiciliary account whilst the holder of the account may be obliged to disclose subsequent funding sources.
“In view of the manifest ambiguity in the provision, we suggest it should be redrafted for ease of implementation by deleting the words ‘a person making an application to open a domiciliary account’ and replace same with ‘a domiciliary account holder’, the memorandum read.
On it’s part, the Chattered Institute of Bankers of Nigeria noted that the provisions on section 2 of the bill on the prohibition imposed did not address explicitly, the extent to which free trade zones operating in Nigeria are affected or exempted.
As for provisions of section 6 which deals with foreign currency imported by foreign nationals to purchase goods in Nigeria, the Institute argued that “ a forex glut could arise if forex that is imported by Nigerians in Diaspora is classified as a source of forex. CBN as a regulator should determine if forex imported by Nigerians in the Diaspora should be sold in the market.
“It was noted that crypto currency and digital currency are not listed or mentioned as being covered under the types of currency in the market,” the institute stated.
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