A proposed measure to outlaw the use of foreign currencies for local transactions in Nigeria has received the support of the Labour Party (LP) and the All Progressives Congress (APC). In order to address economic issues and increase trust in the local currency, the bill, “A Bill for an Act to Alter the Central Bank of Nigeria Act 2007, No. 7,” aims to require that only the Naira be used for all payments, including salaries.
In the Senate, the bill, which was supported by Senator Ned Nwoko, passed its first reading. Using foreign currency in domestic operations is a colonial legacy that devalues the naira and threatens Nigeria’s economic independence, according to Senator Nwoko. Noting the negative impact of “dollarization” on the economy, officials of the APC and LP have voiced their support. In particular, they contend that utilising foreign currency for significant transactions and Salaries worsens the Devaluation of the naira.
The legislation would address some of the fundamental problems.
According to LP spokeswoman Obiora Ifoh, the naira will strengthen if the law is implemented to penalise individuals who stockpile or transact in foreign currency. According to Bala Ibrahim, the National Publicity Director of the APC, giving the naira priority in transactions will improve its standing and lessen its devaluation. Although the use of foreign currency cannot be completely eradicated, all sides agree that the Legislation would address some of the fundamental problems hurting Nigeria’s economy.
Prior measures to control currency use have been taken in Nigeria, most notably by the Central Bank of Nigeria (CBN). The 200, 500, and 1,000 naira notes were replaced in 2022 as part of a currency redesign policy implemented by the CBN to discourage counterfeiting and promote cashless transactions. The efficacy of this endeavour was impeded by obstacles such as implementation problems and public opposition. Countries have taken a variety of international measures to regulate the use of foreign currencies, with varying degrees of success. Argentina, for example, restricted foreign exchange transactions in order to stabilise its economy.
Int’l currency stability is frequently preferred by foreign investors.
Despite these initiatives, the Argentine peso was losing value and the nation’s economic problems persisted, suggesting that these measures were not very effective. It will take strong regulatory frameworks and close oversight by financial authorities to enforce a ban on foreign exchange operations in Nigeria. People and companies used to doing business in other currencies may need to make operational modifications, which could cause temporary interruptions. To guarantee a seamless transition to sole naira usage, compliance measures would need to be precisely outlined.
Opponents of the proposed law contend that it may complicate International Trade and discourage foreign investment. International currency stability is frequently preferred by foreign investors, and Nigeria may become less appealing as a place to invest if limitations are in place. Businesses involved in import and Export may also face more complicated and expensive transactions, which could reduce their ability to compete in the global market. A prohibition on foreign exchange transactions may also have an effect on remittances, which are a major source of income for a large number of Nigerian households.
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Recipients may obtain less favourable currency rates if remittances must be converted to naira upon receipt, which would lower the funds’ total worth. Given how important remittances are to Nigeria’s economy, this might have wider economic ramifications. The proposed law seeks to foster Economic Stability and boost the naira, but it also has drawbacks, such as complicated enforcement, the potential to discourage foreign investment, and ramifications for global Trade and remittances. Addressing these issues and guaranteeing the efficacy of the policy require careful thought and thorough stakeholder engagement.