Forex crisis: Declare cashless policy – Investment analyst tells Tinubu

Some short-term predictions regarding the value of the naira have been made by Adejumo Isaac, a financial and investment analyst.

According to Daily Trust, he did this while urging the federal government under Tinubu to proclaim a cashless policy on foreign exchange through the Central Bank of Nigeria (CBN).

The financial expert claims that this would make forex liquidity strong, which is beneficial for the economy, and that it would also allow most people’s foreign funds to automatically enter the banking system.

He claims it’s official policy that no one in Nigeria should ever see US dollars, British pounds, Euros, Canadian dollars, or any other foreign currency other than Nigerian naira in circulation.

An electronic transfer or cheque payment must go through the bank accounts of the payer and the receiver for all transactions involving foreign exchange, according to Isaac’s statement.

If you are a Nigerian citizen and you are in possession of physical foreign currency, you have one month to deposit it with a commercial bank. Failure to do so will be considered a criminal offence in Nigeria, carrying physical foreign currency for any purpose will result in a jail term of six months with no possibility of fine.

In all candour, you won’t find dollars, pounds, Euros, etc., utilised to purchase little food items or any market goods that require the exchange of physical foreign currency.

There are no compelling reasons to hold forex cash because most transactions involving forex, like paying for school or medical fees or importing raw materials for production, etc., do not physically exchange cash but rather go through banks, which is done electronically.

The policy aims to transfer most of the foreign exchange (FX) sitting in people’s homes into the banking system. This will strengthen the currency’s liquidity, which is good for the economy because stable exchange rates mean less volatility and less speculative demand. However, it also means that a few wealthy people will be able to hoard the country’s FX for their own benefit, which will hurt everyone else.

The long-term plan is to raise exports, which can be accomplished in two ways: first, by increasing crude oil production to 2 million barrels per day (mbpd), which will increase the flow of dollars into the economy (and was maintained at this level for several years between 2012 and 2015); and second, by encouraging backward integration, which means sourcing production raw materials locally, to decrease reliance on imports. Making domestic refining of petroleum products a priority so that less foreign currency is spent on imported refined petroleum products and more can go towards other needs.