Nigeria will enforce the repatriation of dollar-proceeds from exports and is planning sanctions against those not complying, Central Bank Governor Godwin Emefiele told Reuters on Tuesday.
Africa’s largest economy has been hit hard over the past year by a steep drop in oil prices and political uncertainty over a closely fought and delayed election.
The turmoil has seen the naira lose more than 20 per cent against the dollar since the middle of 2014, breaking through the important 200 per dollar level last month as it racked up the biggest monthly loss in more than five years.
In February, the central bank introduced trading rules under which banks will be able to purchase foreign exchange only if they have a prior order from a corporate customer, such as a fuel importer or foreign mobile phone company looking to repatriate profits or dividends.
Now, policy makers are looking at exporters to ensure hard currency liquidity within Nigeria, pondering sanctions against exporters who fail to repatriate proceeds and funnel them back into the official market within the stipulated 90-day limit, Emefiele said.
“If you refuse to sell your export proceeds that you repatriate in the foreign exchange market … we will ban them from accessing foreign exchange in the Nigerian foreign exchange market,” Emefiele told Reuters in an interview.
Emefiele said much of the pressure on the naira over the past year was due to activity of importers and exporters, the former frontloading purchases of hard currency while the latter were hoarding their overseas cash earnings.
The resulting hiatus on the currency markets has forced the central bank to intervene, and this has led to a steep drop in Nigeria’s foreign cash reserves to four to five months’ worth of imports.
Forcing exporting and importing companies to comply with existing regulations on their use of the currency market was now necessary.
“Another thing we will do is that we will ask the banks not to loan money to them (exporters who don’t repatriate hard cash on time),” he said, saying the measure would come into effect soon, but declining to give a date.
Emefiele estimated that some $3-4 billion of proceeds due to be repatriated were outstanding, of which 40 per cent would come from oil companies.
“We are saying … don’t put your foreign exchange in the hands of people who want to carry cash and take it abroad,” he said. “Use it to import tangible items that are documented.”
Also scrapped amid February’s de facto devaluation were the bi-weekly auctions in which the central bank sold foreign currency at a predetermined rate. Emefiele said these would not be reintroduced.
“(The window) is not closed. It is crushed and destroyed for life,” said Emefiele. “Nothing is going to be opened again. We are not going to go back to a subsidised regime.”