Reps Probe Use Of USD As Legal Tender For Domestic Transactions

11th October 2023

The Nigerian House of Representatives has issued a call to the Central Bank of Nigeria (CBN) to tackle the ongoing depreciation of the naira against the U.S. dollar. This resolution was passed during a plenary session held on Tuesday, following the adoption of a motion put forth by Ismaila Haruna Dabo, a legislator representing Bauchi state.

Additionally, the House has resolved to initiate an investigation into reports of the use of US dollars and other foreign currencies for domestic transactions in the country.

The value of the naira has experienced consistent fluctuations since the CBN implemented the currency float policy, which allows market forces to determine exchange rates. In September, the CBN instructed deposit money banks (DMBs) to refrain from using profits gained from naira revaluation for dividend payments or operational financing. A currency revaluation occurs when the value of a currency is adjusted concerning another currency within a fixed exchange rate system.

Dabo, while presenting the motion, drew attention to the "alarming exchange rate" and how it has adversely affected Nigeria's economy. He pointed out that the increased demand for dollars and a dollar shortage have resulted in "untold hardship" for the nation. Noting that approximately 90 percent of Nigeria's export earnings come from oil, Dabo emphasized that changes in global oil prices have a significant impact on the country's foreign exchange market, contributing to the continuous depreciation of the naira.

Dabo further stated that this depreciation has led to higher inflation, increased cost of living, and made imported goods more expensive, thereby disproportionately affecting the most vulnerable citizens. He also raised concerns about the potential impact of a depreciating naira on Nigeria's external debt servicing costs and government spending on critical sectors like healthcare and education.

During the debate, Ademorin Kuye, a legislator from Lagos, raised concerns about certain entities, such as airlines, schools, and real estate businesses, demanding payments in dollars, which goes against the CBN Act that designates only the naira as legal tender in the country. He emphasized the need to address such violations.

The motion was passed by a voice vote under the leadership of Ben Kalu, the deputy speaker. The House called on the CBN to implement monetary policy adjustments to stabilize the currency and address speculative activities in the forex market. It also urged the CBN to increase the naira withdrawal limit in order to reduce pressure on dollars and other foreign currencies.

Furthermore, the House recommended that the federal government promote exports and reduce imports by enhancing foreign investors' confidence in its fiscal and monetary policies. It tasked the committees on banking regulations and national security and intelligence with collaborating with the CBN to devise compliance strategies.