The Federal Government is reportedly contemplating a significant policy shift to stabilize the Naira, considering the conversion of foreign currencies in domiciliary accounts to Naira. This move comes in response to the recent historic decline in the Naira’s performance. If implemented, the government would mandate the conversion of over $30 billion idling in domiciliary accounts at a rate determined by the Central Bank of Nigeria.
Sources within the Presidency suggest that the forex scarcity and Naira’s decline are primarily driven by elite hoarding of foreign currencies, particularly at the beginning and end of each month. The government aims to address this issue, emphasizing that dollars in domiciliary accounts are not meant to stay but should be automatically converted to the local currency.
This potential policy shift represents a departure from the government’s earlier stance in September 2023, where it sought to attract funds from domiciliary accounts and those held by Nigerians abroad for massive investments in various sectors of the economy. The Minister of Finance, Mr Wale Edun, had highlighted the substantial foreign exchange sources in Nigeria, urging the repatriation of funds to invest in the local economy.
While some banking industry insiders express concerns about the practicality of converting funds at an undetermined rate, the government appears determined to address the forex scarcity issue. Recent high-level meetings involving the Minister of Finance, the Governor of the Central Bank of Nigeria, and the Chairman of the Economic and Financial Crimes Commission underscore the commitment to enhancing financial system efficiency and stabilizing the Naira.
