The Nigerian Senate has thrown out a bill proposing a significant overhaul of the country’s foreign exchange (forex) market. The legislation, sponsored by Senator Sani Musa, Chairman of the Senate Committee on Finance, aimed to establish a formal foreign exchange market and empower the Central Bank of Nigeria (CBN) with broader control over forex transactions.
While Senator Musa argued the bill would stabilize the naira and boost the national economy, it faced criticism for lacking clarity and potentially hindering market flexibility.
Musa’s Proposed Reforms
Senator Musa presented the bill as a means to address perceived shortcomings in Nigeria’s current forex regime. He argued that the existing law, the Foreign Exchange (Monitoring and Miscellaneous Provision) Act of 2004, requires revision.
The proposed reforms included:
Establishing a Formal Foreign Exchange Market: The bill sought to create a designated marketplace for forex trading, potentially aiming for increased transparency and efficiency.
Enhanced CBN Control: The CBN would gain authority to manage all forex dealings and transactions, including determining the base exchange rate.
Increased Reporting Requirements: Authorized dealers would be required to submit detailed reports to the CBN on the source and utilization of foreign exchange exceeding $10,000. Additionally, they would need prior CBN approval to import foreign currency notes.
Regulation of Domiciliary Accounts and Foreign Exchange Payments: The bill proposed granting the CBN the power to regulate the operation of domiciliary accounts and dictate how foreign exchange can be used for payments within Nigeria.
Opposition and Concerns
Despite Senator Musa’s arguments for market liberalization and economic development, the bill encountered resistance from other lawmakers.
Key points of contention included:
Clarity and Redundancy:
Several senators, including Senate President Godswill Akpabio, expressed confusion regarding the bill’s purpose. Unclear language left it uncertain whether the legislation aimed to amend or completely replace existing forex regulations. Additionally, concerns arose that the bill’s provisions largely mirrored existing CBN powers outlined in the CBN Act of 2007.
Market Disruption
Lawmakers like Senator Aliyu Wadada argued that the proposed measures, particularly increased CBN control and reporting requirements, could stifle the forex market and hinder its smooth operation. They emphasized that Nigeria already possesses a functional forex market.
Potential Negative Impact
Senators like Adams Oshiomole expressed concerns that the bill’s provisions, such as CBN control over exchange rates, could negatively impact market stability and potentially lead to a more rigid system.
Read Also: CBN Governor Cardoso: Rate Hikes Stabilized Naira, Plans to Double Remittances in a Year
Bill Thrown Out
Following the debate, a majority of senators voted against the bill, effectively rejecting it. This outcome indicates a preference for the current forex framework, albeit with the possibility of further discussions on potential refinements.
The future of Nigeria’s forex market remains a topic of national discussion. While the Senate rejected this particular bill, the need to address forex volatility and ensure a stable environment for businesses and individuals may lead to further legislative proposals or policy changes in the future.
