Forex policies: Many shops are already folding up — Brimah In Tribune

Culled from Tribune, 25th April, 2016

by Ruth Olurounbi

Dr Peregrino Brimah is an international business person and a rights advocate and coordinator of ENDS, a socio-philanthropic human rights organisation. In this interview with
RUTH OLUROUNBI, he contends that current forex policies would turn out to be the final blow to small businesses in Nigeria, as only big businesses are left to survive.

You have been on the campaign against what you called illegal deductions on foreign transactions by Nigerian banks. You even alleged that the CBN is enabling these banks in this situation, how specifically do you think the CBN is doing this?

The central bank is the apex bank, in charge of regulating and overseeing all activities of commercial banks. While the commercial banks are regulated by the CBN, the customer deals with the commercial banks and not the CBN whose duty is to regulate their products and services in the interest of Nigeria and Nigerians.


The central bank in new policies since the Buhari administration has claimed to be regulating access to foreign exchange by limiting the amount of withdrawals per month and per year for customers. It claims this is to shore up the Naira. However while in the past, Nigerian debit card dollar withdrawals were converted at the official exchange rate, today under new policies they are converted at the parallel market rates and above. In recent withdrawals I have made the past days, my cards gave me between 299 and N305/dollar. This is the parallel market rate. I have never heard of a country where its banks serve dollars at the black market rates. I call all these illegal because we clients have not received any memo to this effect. This is because the banks and apex bank know that these operations are unconstitutional.


How do we know exactly that these charges are illegal? Are there provisions that prohibit banks from charging same as parallel markets? And, do we know if the CBN is aware that these charges are occurring in the Nigerian banks?

As Section 16 of the CBN Act 2007 clearly states, “the exchange rate of the naira shall be determined from time to time, by a suitable mechanism devised by the (Central) Bank for that purpose.” The exchange rate has been set at about 198. Nigerians as I have earlier stated, do not interact directly with the CBN, but through commercial banks. The N300 ranging parallel market rates these banks are giving clients are set by who? The central bank has reneged its duty according to its Acts and Section 16 of the Constitution of the Federal Republic of Nigeria, 1999 as amended, and has deregulated the system and put customers totally at the mercy of the whims of the banks. This has opened up opportunities for massive foreign exchange trading corruption right within the walls of the banks like never before seen in our history.


Many business owners involved in export and import businesses say that their banks charge them same rates as the parallel markets, thus, crippling their businesses. What is your view on this?

While the government has changed, the central bank has remained under the same management. As has been seen with reversals on dollar access policies, the current administration cannot be said to have a clear vision on controlling the foreign exchange market. As a foreign businessman myself, I cannot complain enough about the problems the lack of access to CBN rate dollars and provision of dollars at parallel market rates is doing to my business.


These policies are going to be the final blow to small businesses while only big business will survive. Even before now it was next to impossible to buy dollars at the bank rate through banks. The complications for processing the Form M and other documents are made essentially un-conquerable. Small businesses are left to buy dollars from the BDC rates, at the same rate on the streets as in the commercial banks. This has been a devaluation of about 50 per cent since mid last year when dollar exchanged at about 160.


Zinox’s Leo Stan Ekeh, a well-known Nigerian businessman had predicted the collapse of 90 per cent of Nigeria’s businesses if access to foreign exchange was not eased up. Many shops are already folding up while Nigeria is being aggressively exploited by its neighbours who are rushing in to buy up our products at half the prior cost. The increased predating on the devalued system by Chad, Niger, Togolese and other neighbouring businessmen is leading to inflation in the system as a second consequence of the convoluted system. The predictions for Nigerians and Nigerian businesses are bleak. Even when the administration finally fixes the forex system, Nigeria would need years to recover from the inflation and effects on businesses.


International communities have called for the devaluation of the naira. Do you think this could serve as solution to the alleged fraudulent charges by the banks?

Initially I had believed that anything to do with devaluation was bad. But upon further examination of the characteristics of our present crisis, I had a re-think. There are two major problems of continuing as we are now with the Venezuelan system of two drastically different exchange rates, Central bank and parallel market: Firstly, this is an avenue for tremendous corruption. People are round tripping dollars, both physically and on a spot and making a killing. All you have to do one of the privileged few who is connected with the banks and has access to Central bank rate dollars. You do not have to risk being caught by extracting the dollars and selling it on the streets, or physically round-trip by actually buying products at these convenient rates, which will make you twice as competitive as the common businessman. All you need to do is “sell your access.” Find a regular businessman who needs products and offer him a suitable parallel market rate. Then collect payment and process the Form M for him. This will be done legitimately and without any possibility of detection of prosecution. Access to a million dollars at the official rate will make you half a million dollars in a day. This new window of corruption due to the dual rates is why the newspapers have been brimming with allegations and accusations of “round-tripping” by members of the Presidency and top ruling party politicians.


The second issue why devaluation may be the better solution at this time is in effort to regulate and limit the devaluation of the Naira in the parallel market, which is really the only access to dollar for the common Nigerian. Devaluation is not a permanent thing but should be done according to the prevailing conditions, till the rate can come back to reasonable limits. If the government allows the central bank rate to fall toward the parallel market rate at which it is sold by all banks, it is estimated that the two rates will meet at about half way between each. We may end up with a uniform N250/dollar rate. This will stop the corruption in the banking sector, and will reduce the risks and pressures on the dollar, and in time may enable the naira to regain power. As the Naira regains power due to this process and other economic policies hopefully being instituted, the devaluation can progressively be reduced till the ate returns to below 200.


As I have said before. For majority of Nigerians and as far as current inflated prices go as a result, the Naira is already devalued. Only the cabal get naira at the CBN official rate. So who are we fooling?


Could we characterise these charges as part of corruption President Buhari is fighting against?

I have compared the foreign exchange scam going on to the fuel subsidy scam of the Jonathan era. I believe these are pretty much the same types of windows for the amassing of wealth by the politically connected and their enrichment while the masses wither. The wealthy like Dangote have been promised access to CBN rate dollars while the rest of us individuals and small businesses have no access. Whereas small businesses employ 70 per cent of Nigeria’s labour, the big businesses barely employ 20 per cent. I see this is corruption and oppression of the masses once again. There should be equal access for all Nigerians, or no access to any.


What do you think of the newly imposed stamp duty on bank transactions? Would you say this is a new way to defraud Nigerians?

There are a host of unwarranted and excessive charges levied on customers by Nigerian banks. While a few appear to originate from the banks, what is disturbing is that many of these excessive and oppressive charges are actually directed by the apex bank.


The apex bank policies have forced their cash-less policy on customers not with incentives but rather with levies. These levies or fines as they are better called are taxed on almost every transaction made through the banks under the Central bank directives.


What is stamp duty? This is extortion. Where in the world do you see them charging clients for receiving payments? Banks are happy to receive your money as the money is used by them for their profiting business. Banks beg for deposits and even entice customers to do so all over the world, with bonus points, flyer miles and other perks.


The institution of this new stamp charge is the latest in a series of such extortion policies enforced by the Central bank. This Stamp charge adds on to the levies per mile on all transactions. There are just so many of these taxations, it is unbelievable. I have operated accounts abroad for years. There is no single deduction from my accounts.


Nigeria charges to send you text messages. Charges you when you deposit, when you transfer or withdraw money. The banks charge you for new ATM cards, account maintenance charges, ATM card maintenance charges, hardware token charges. There are just so many charges, some by the banks and many granted by the CBN. Abroad, all these services are free. Who does all this money go to? Does it go the CBN and Nigerian economy or stay with the banks for their largesse?


It is clear that Nigeria has fallen victim to this extortion because we have had both recent apex bank directors as bank men. Both the current governor, Godwin Emefiele and the immediate former one who instituted many of these levies, now Emir Sanusi Lamido Sanusi are bankers. There is a clear conflict of interest here and predilections to serve the bank’s interests where they have shares and overwhelming vested interests. We hope in the future non-bankers are appointed to that office who will hopefully serve the interests of the people and not the banks.


In the last few months, we have witnessed policy somersaults from the CBN, prompting some sense of lack of confidence in the direction the nation’s economy is going. Do you think these concerns are legitimate?

They are legitimate. We would have confidence in the system if there was a clear and consistent policy direction. This is lacking. For one thing, I do not trust the same CBN governor who oversaw the corruption and tanking of Nigeria’s economy leading us up to this point. Secondly, there appears to be a lack of a single policy idea and the competing and contrasting policy directions in making a mess of the whole thing. New policies and restrictions are thrown out every day, usually with the customers’ convenience appearing to be a least concern. While the global economy as related to oil prices is at the back of a lot of this confusion, the government’s body language is not yet reassuring and we are seeing corruption continuing in the system along with the demonstration of a yet strong hold on the system by corrupt persons (cabal) willing to continue sabotaging the system to their benefits.


In terms of policies structuring, how would you rate Godwin Emefiele’s performance as a CBN governor in comparison with say Charles Soludo?

I rate both Godwin Emefiele and Sanusi Lamido Sanusi very poorly. Soludo was a people’s man, these two recent governors are bankers. Virtually all their policies have been to quadruple bank profits while frustrating and crippling the masses. Sanusi passed on the baton to Emefiele, his brother and partner. I see both men’s policies as identical. I actually predicted this the minute I saw Jonathan selected Emefiele. You can only have the interests of banks protected when you bring a bank manager. This is natural. But a system can never work and be sustained if you ignore and exploit the masses just for the pockets of a few.


Some stakeholders in the financial industry are of the view that an economist should, moving forward, be appointed as the CBN governor, as against a banker. Do you agree with them and why?

Absolutely. The more important question is: do I feel confident President Muhammadu Buhari will do so? No. Unfortunately, President Muhammadu Buhari seems disconnected or purposely shielded from the realities on the ground and the pressing issues and reasons why Nigerians voted for change. A lot of what the new administration has been doing, apart from its war against corruption and terror, have been typical policies of the past democratic years. If not practices and policies of Jonathan, then those of Obasanjo. It would be uplifting to see someone from outside the banking system selected as its new governor.

Related Article: Are ‘illegal’ forex charges by Nigerian banks killing SMEs?