There is palpable concern that the Central Bank of Nigeria could consider converting dollars in domiciliary accounts of banks held on behalf of depositors into naira. This follows the recent ban on the sale of forex to the BDCs by the apex bank over accusations of fraud and arbitrage.
Currently, operations of domiciliary accounts are enshrined in the Central Bank’s Foreign Exchange Manual which was last updated on July 26th, 2018. Under Memorandum 25 of the manual titled Foreign Currency Domiciliary Accounts, the CBN sets out policies for operating a domiciliary account
From the money weekly economic and business roundtable discussions on the popular app, the ClubHouse session held last Saturday were concerned that the arbitrary nature of CBN pronouncements could one day lead to an annexation of dollar deposits estimated at about $15 billion.
This is also based on concerns that the central bank might in an act of desperation choose to convert some of the balances to address Nigeria’s foreign currency supply shortages.
Nigeria has earned less from oil in the last year and is currently running on a massive revenue shortfall. External reserves have hovered around $33 billion in the last 3 months as foreign investors shun investing in the country. This, therefore, suggests that the central bank might consider this option to address the foreign exchange shortfalls.
However, “on the money” allayed these concerns insisting that the CBN will not convert the dollars into naira. According to Wale Okunrinboye, head of research at Sigma Pensions, the last country that did this was Argentina and it resulted in a catastrophic deterioration in its currency crisis.
He maintained that the central bank was not that desperate to carry out such an action. Another analyst who was on the show, Dele Akintola, opined this was not in any way under consideration and that the laws and regulations that guides ownership of domiciliary accounts cannot be changed easily by the Central Bank.
Both analysts opine that taking such a decision will portend immense political ramifications considering the significant role domiciliary accounts play in trust and confidence in the financial markets and banking sector. Any such move will be swiftly rejected by the National Assembly, Dele concludes.